Renting a space for 700-800 million VND/month, restaurant owners are struggling to cut losses.

Struggling to cut losses

Responding to VTC News, Mr. Nguyen Manh Hung, owner of a restaurant in Ben Nghe Ward (District 1, Ho Chi Minh City) said that the economic recession has caused his restaurant's revenue to plummet. Monthly revenue has decreased by more than 50% compared to before. However, each month, the restaurant still has to pay nearly 800 million VND in rent.

“ We admit that business sometimes makes profit, sometimes makes loss. But if the loss continues like this, we will go bankrupt. We want to reduce the rent but the landlord has not agreed because the contract lasts for 5 years. They only promised not to increase the price,” Mr. Hung lamented.

Many large restaurants in Ho Chi Minh City are struggling to pay their rent due to poor business. (Illustration: D.V)

According to Mr. Hung, the rental price of nearly 800 million VND/month was signed when the economy was growing strongly. However, the COVID-19 pandemic forced the restaurant to use all of its reserve funds to "feed the army". However, after the pandemic passed, the economy became much more difficult than before. He seemed helpless and fell into a deadlock.

According to Mr. Hung, if he returns the premises, he will lose the 30 billion VND invested in the restaurant, and the money from liquidating the items is also insignificant. Therefore, the only way left is to reduce the rent to survive and create jobs for workers.

“ For the restaurant industry, it only takes 3-4 months of difficulty to have no cash flow to survive. Meanwhile, we have been struggling all year 2023. The restaurant will have to close if the landlord does not reduce the rent,” Mr. Hung said.

A restaurant on Nguyen Hue Street (District 1) has returned its premises but has not had a new tenant for more than 8 months. (Photo: Dai Viet)

A representative of a restaurant in Ward 15 (District 10) said that this restaurant is also having a “headache” with the rent when the monthly rent is more than 700 million VND. Although it has cut staff and minimized operating costs, this restaurant is still facing extremely difficult times.

The landlord has not yet made any move to reduce the rent, although the restaurant representative has repeatedly requested a reduction. If this situation continues, the restaurant may have to close after Tet.

Ms. Tran Ngoc Yen, owner of a restaurant in Vo Thi Sau Ward (District 3), shared that rent is a huge pressure for her. Every month, her 255 m2, 3-storey restaurant has to pay 320 million VND/month in rent. However, the restaurant's revenue has decreased sharply, causing her to have to cover losses for the past 6 months.

“ We have repeatedly asked the landlord to reduce the rent, but they only reduced it by 10 million VND/month. This reduction is not suitable for the current economic situation. They have to reduce it by 40-50% for us to continue doing business,” Ms. Yen said.

According to Ms. Yen, although the signed contract is valid until 2025, if the landlord is not willing, she will be forced to close the restaurant and accept a loss of more than 4 billion VND invested.

A space in the center of Ho Chi Minh City has not had any new tenants for many years. (Photo: Dai Viet)

According to VTC News, a series of restaurants in Ho Chi Minh City are facing cash flow difficulties due to declining revenue. Many restaurants with rental prices ranging from 500 million VND to over 1 billion VND are facing the risk of closing down because the rental prices are not decreasing.

Difficult to reduce price

Mr. Ta Trung Kien, Deputy General Director of Wowhome Company, commented that there are 3 main reasons why it is difficult for land prices to decrease.

Firstly, many large areas of land for rent in the central area of Ho Chi Minh City are owned by the State or by people with good financial capacity, so it is very difficult to negotiate and reduce rental prices.

Second, landlords may own 5-7 houses, so they can accept a loss for a few months to find new tenants in 2024. However, with the current business situation, finding new tenants is not easy.

Third, the landlords do not reduce the price because they are afraid that it will be difficult to increase it again in the future. Therefore, they decide to keep the price "sky high".

“ If negotiations fail, the tenant will be in a difficult situation and may lose all the money invested in the facility,” said Mr. Kien.

Sharing the same opinion with Mr. Kien, Mr. Nguyen Tan Phong, real estate expert - Standing member of the Vietnam Real Estate Brokers Association, said that currently, many premises owners have good financial capacity. Therefore, it is very difficult for tenants to negotiate with landlords.

Mr. Phong shared that renting out premises is sometimes not the main source of income for landlords, it is only their secondary source of income. Therefore, landlords are often "indifferent" to reducing rents.

In addition, many rental premises are being mortgaged by landlords, if the price is reduced, it will affect the valuation of the property. In addition, the price reduction also affects the asking rent for new customers and many other issues.

According to real estate experts in Ho Chi Minh City, the premises in the city center mainly serve tourists and the middle class and above. When the number of tourists decreases, middle-class customers also cut back on spending, so the tenants will have difficulty with revenue. This leads to greater pressure to pay rent and forces the tenants to change their business plan or find a new, more suitable location.

DAI VIET

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