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Retail Market Potential Trends Amid The Covid-19 Pandemic
 

(April 29, 2020) Despite the impacts of the COVID-19 pandemic on Vietnam's retail market in Q1 2020, the market still recorded positive signs from e-commerce, online shopping, and delivery services. 

 

According to General Statistics Office of Vietnam, sales in Q1 2020 of F&B, hotel service, and tourism service decreased by 9.6% and 27.8% y-o-y, respectively. Recorded by CBRE, the footfall in shopping centers decreased by approximately 80% in both Ho Chi Minh City and Hanoi during the outbreak. In the event the pandemic contained in Q2 2020 (Scenario 1), vacancy rate in the CBD will remain unchanged, while non-CBD will likely see a slight increase at 1-2 ppt. In another scenario when the pandemic contained in September 2020, vacancy in both cities will surge by 5-7 ppt, future supply in Ho Chi Minh City will drop 76% and there may no new project to be launched in Hanoi this year.

 

The slow-down in retail’s revenue has accelerated E-commerce and online shopping which play an important role in retrieving trade of many stores during the outbreak. In Vietnam, among the big names in the field of e-commerce, Tiki has grown at the fastest pace and reached a record of 4,000 orders/minute, SpeedL and Saigon Co.op have grown exponentially in online sales. On the other hand, Grab has activated a new platform 'GrabMart' to serve customers' shopping needs while staying at home. In the Asia Pacific market, omni-channel and online retail performed well during the outbreak, from consumer products, cosmetics to luxury goods such as cars, or services such as sightseeing, museums, real estate tours ... can run on the online platform. In the long term, the growth of e-commerce will be a solid foundation for any future development in the retail market.

 

COVID-19 impacts on the shophouses and shopping center market:

 

At the moment, early termination at shopping centers seems less active thank to supporting policies in terms of rent during the outbreak. On another hand, shophouse recorded more cases mainly from those who had limited budget for long-term business. Since the Government enforced social distancing, most industries have been closed except for the essential ones. As a result, a revenue drop raised up financial pressure leading to the early termination. Early termination and transfer are a must to maintain the "survival" level for businesses in general, this happens most often in restaurants, bars, and beer-clubs ..., which accounted for up to 90% compared to other business models. For chain brands, the closure of several shophouses, combined with restructuring policies or salary cuts for employees is also a short-term solution to stabilize funding. 

 

COVID-19 impacts on the market rent:

 

Although the social distancing period has been released at the end of April, most industries are still not allowed to open as usual. Revenue in April was expected to decrease by 90-100% compared to the same period last year and decreased by 60-70% compared to March. The current situation forces developers to continue incentive policies to reduce cost burden as well as create recovery time for tenants to overcome this difficult time. In February, the investor was still conservative and did not give any specific signal to support the tenants. Until March, the Government requested all the entertainment venues to close their businesses, the developers began offering supportive policies ranging from 10-30% of rental costs depending on business models with different levels of impacts. In April, many developers were willing to offer up to 50-100% of the rent. For shophouses, the reduction is recorded at 20-30% in rent. Besides, developers have to be more flexible in terms of deposits & payments negotiation, and support tenants in many forms.

 

In CBRE expert’s perspective:

 

Ms. Vo Thi Phuong Mai, Associate Director - Head of Retail Services of CBRE Vietnam, stated: “Covid-19 has negatively impacted on offline traffic but at the same time created many opportunities to increase positive growth for small and medium-sized models such as convenience stores, pharmacies and especially the e-commerce field. E-commerce is a sparkling spot and transforming to support physical stores during the outbreak. The omnichannel capability will be more resilient and may even outperform.”

 

END.

 

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