Retail market sees old and new combined

Vnre.blogspot.com - With the country’s steady economic growth and increased world integration, shopping at department stores and supermarkets has gradually become a way of life. So, the number of commercial centers in major cities like HCMC and Hanoi has doubled in the last three years.

But a large part of the population has yet to kick the habit of buying things at dirty and stinking traditional markets. This has led some property developers to combine the old and new business models and for experts, this combination is worth considering when property projects are devised.

Richard Leech, executive director of CB Richard Ellis Vietnam (CBRE), says the growing proliferation of the organized retail format will start to have a profound effect on urban life in Hanoi and HCMC and will drive the change towards an international style market economy.

There are some 650 traditional markets in the country, Leech says, and if they are upgraded into modern commercial centers, those facilities will generate a significant supply of retail space to meet growing demand of retailers.

Hang Da market in the capital city of Hanoi will be turned into a five-storey building with some 9,000 square meters for traditional market and modern shopping center late this year.

Leech says the mixed business model will benefit investors, retailers and shoppers and that traditional markets will act as a high traffic generator to trade centers and in contrast the trade center will bring more high income customers to the wet market sector.

“The ‘rebirth’ of traditional markets will take the form of modern and well-organized retail concepts,” Leech remarks, adding the form will improve health and hygiene and security conditions in the market.

The director says that traditional markets often have loose control while tight control is often seen at trading centers, so mixing the two sectors requires good management of registered brands and goods quality among others.

“Merchandising should be controlled. And owners and investors should understand the combination of management before taking their projects,’ Leech says.

He says in order for this surge in supply of retail space to succeed, developers, either local or international, will need to pay attention to numerous factors to ensure the success of the shopping center.

In general, these critical success factors can be divided into five categories, including hardware design, software planning, leasing strategy, owner expectation and retail property management.

According to CBRE, there are more than 400,000 square meters of retail space in HCMC and Hanoi, in which HCMC has three times as much as retail space in Hanoi. The pipeline supply is set to increase dramatically over the next three years.

The market research company projects that HCMC will have 1.3 million square meters of retail space and Hanoi will have approximately one million square meters of retail space by 2013.

Retail rentals in prime central business district locations in HCMC have continued their upwards trend with average rents ranging from US$96 to US$124 per square meter per month. The market records the highest rent of up to US$250 per square meter in the central business districts. Many buildings are running at 95% occupancy.

Meanwhile, rentals in non-central business district locations have suffered more on account of increased supply and limited demand. Retail rents in fringe districts range from US$39.5 to US$58 per square meter per month.

Leech says it is hard to combine the two sectors of wet markets and modern shopping centers, so developers should have to make it a regular practice to deploy the tools of market research and shopping center analytical skills to determine the appropriate market positioning and balance tenant mix for shopping center projects that they plan to develop.

Reported by Dinh Dung/ The Saigon Times Daily