Rents on upper floors of shopping centres in busy central business district (CBD) areas were less affected, but fell 6.6 percent quarter-on-quarter, while those outside CBD areas plunged 17.6 percent, according to a Q1 report by real estate consultancy CBRE Vietnam.

The drop in prices followed similar movements in the retail sector, which has been badly affected by the pandemic. In the first quarter, total revenues from food & beverage, accommodation & tourism services decreased 9.6 percent and 27.8 percent year-on-year respectively, the report says.

Overall, the number of visitors to HCMC shopping centres began decreasing in February and was down 80 percent year-on-year by the end of March.  

During the government-imposed nationwide social distancing period between April 1 and April 15, businesses in non-essential services that had to shut down and their revenues dropped drastically.

Businesses in food and beverages, fashion and accessories, and entertainment have seen revenues drop 50-80 percent compared to normal operations, the CBRE report says.

However, tenant occupancy of retail space remained unchanged from last year in CBD areas, and actually rose 0.9 percent in non-CBD areas, thanks to landlords providing rental discounts between 10-30 percent, and some others even foregoing rent completely for businesses ordered to close down.

The report forecasts that if Vietnam is able to bring the Covid-19 epidemic under control by the second quarter of this year, occupancy would likely remain stable until the end of the year, although that of modern retail in non-CBD districts may decrease slightly. Given this scenario, rents could likely recover to pre-epidemic levels in CBDs, and fall 5 percent year-on-year in non-CBD areas.

If the epidemic lasts until the end of the third quarter, occupancy will likely fall 5-7 percentage points in non-CBD areas, with a corresponding 10 percent fall in average prices. If that happens, landlords are likely to keep current rent reductions of up to 30 percent until the end of the year or allow delayed payments to keep their current tenants, the report says.

No new retail space projects were released to the market in the first quarter, keeping the total available net lease area (NLA) in HCMC the same as the last quarter of 2019, at 1.05 million square meters.

Future projects that are under construction are also showing signs of delay, and if the epidemic cannot be controlled in the second quarter of this year, new supply this year might only amount to 20 percent of the 152,000 square meters CBRE had forecast in last year’s reports.