What do we see from Starbucks, McDonald's... returning premises in "golden land" of Ho Chi Minh City?

Big brands leave their premises on the street

The market has recently witnessed a series of F&B (food and beverage) brands returning prime locations in Ho Chi Minh City after many years of association.

First, Starbucks abandoned its location on Han Thuyen Street (District 1). Then, McDonald's announced it would stop operating McDonald's Ben Thanh store after 10 years, which was also the time this brand entered the Vietnamese market.

It's Burger King's turn to say goodbye to its location on Pham Ngu Lao Street, District 1, after 11 years of presence here. This location is opposite 23/9 Park, just a few hundred meters from Bui Vien Street, about 1km from Ben Thanh Market.

According to observations, the rental prices of these premises are all expensive. After Starbucks left, the premises of more than 200 square meters on Han Thuyen Street are still being advertised for rent by many brokers for several hundred million VND/month. The rental price of premises in the area where McDonald's Ben Thanh is located is also around 350 million VND/month.

High rents amid tightening spending may be the reason these brands are accepting to close operations in prime locations.

Previously, many other brands also returned the premises and stopped renting the townhouses. Highlands Coffee returned the premises at the corner of Nguyen Du and Pasteur; YEN Sushi closed the branch at 8 Dong Khoi; MIA returned the premises at Phu Dong Junction...

In reality, since the Covid-19 pandemic until now, many premises on central streets of Ho Chi Minh City such as Dong Khoi, Nguyen Hue, Le Loi, Hai Ba Trung, Ngo Duc Ke... have fallen into a state of vacancy, with no tenants.

Many premises on the street are deserted (Photo: Nam Anh).

Rents for these areas can be up to several hundred million VND per month, and Dong Khoi Street is even ranked among the most expensive rental properties in the world . The rental price for premises on Dong Khoi Street is higher than the most expensive streets in Munich (Germany), Amsterdam (Netherlands) or Bangkok (Thailand), according to Cushman & Wakefield.

Responding to Dan Tri newspaper reporters recently, Ms. Trang Bui - General Director of Cushman & Wakefield - said that economic difficulties and landlords demanding very high prices are the main reasons why retail premises on the street are difficult to find tenants. Brands must consider business problems, weigh costs and profits rather than promoting their brands from the premises.

Sought after commercial center space

While the street space seems deserted, on the contrary, the shopping malls are quite bustling with high occupancy rates.

Savills Vietnam’s third quarter report recorded that retail space in shopping malls had an occupancy rate of 94%, up 4 percentage points year-on-year. Some spaces in key areas even had 100% occupancy thanks to high traffic volume, diverse tenants and effective management.

CBRE Vietnam also recorded that the occupancy rate in shopping malls in Ho Chi Minh City is always high, reaching 94%. In 9 months, the newly leased retail space recorded 87,000m2, the highest in the past 3 years. Newly opened shopping malls are almost 100% filled.

The reason why shopping malls in Ho Chi Minh City are so attractive is because of the limited supply in the past 3 years. According to CBRE Vietnam, from 2020 to 2022, Ho Chi Minh City will not have any new supply for this segment. This year, the market has recorded 4 new shopping malls opening.

Due to limited supply, rental prices of shopping malls in Ho Chi Minh City have increased significantly in recent years, and prime locations are still continuously sought after by many tenants.

Ms. Pham Ngoc Thien Thanh - Head of Research and Consulting Department of CBRE in Ho Chi Minh City - commented that there is a wave of shifting from street-side retail space to shopping centers. Townhouse retail space will gradually become suitable for short-term tenants whose brands are not strong enough.

Shopping malls have more competitive advantages in management and operations such as rental policies, promotional programs, and constantly innovated event programs to attract consumers.

Ms. Cao Thi Thanh Huong - Senior Manager of Research, Savills Vietnam - believes that the good performance with the expansion of brand chains and strong demand from key tenant groups will help promote the retail market in Ho Chi Minh City to perform better. In the last quarter of the year, more than 27,600 square meters of floor space from 3 projects outside the city center are expected to open with an occupancy rate of at least 80%.

Source: https://dantri.com.vn/bat-dong-san/thay-gi-tu-viec-starbucks-mcdonalds-tra-mat-bang-o-dat-vang-tphcm-20241010075530008.htm