Commercial shopping centers across Vietnam are having a problem in getting new tenants, as e-commerce shopping becomes the norm, and fewer Vietnamese consumers visit shopping centers. As a result, shopping centers are converting retail space into office space and pitching the convenience of having parking and food courts available for office employees. Other shopping centers have floors that remain unused.
Some real estate experts say the shopping center slowdown is due to the e-commerce boom and that the long-term viability of shopping centers involves a flexible space approach that can include co-work spaces, office spaces lifestyle amenities tenants, such as gyms and spas in addition to food courts and retailers.
E-commerce and mobile services are expanding in Vietnam because of the increases in Internet use among the population and the growth of e-commerce and mobile services that allow consumers to connect with their favorite brands and retailers from the location of their choice – home, office or coffee shop.
E-commerce and mobile services are expected to grow at annual rates of 30% ~ 50% per year for the next five years. As well as a proliferation of smart phones and retailers who have developed an online presence, the development of e-wallet and QR code payment technologies will also contribute to this growth.
Related to non-retail space becoming a norm in Vietnamese shopping centers, examples can already be seen across various developments.
• The Pearl Plaza Commercial Centre in HCMC’s Binh Thanh district has a higher vacancy rate that projected when the project was being developed.
• The Vincom Shopping Centre in the Thao Dien, District 2 area has half of one its floors being used as office space for a variety of real estate companies.
• The Van Hanh Mall, in HCMC’s, District 10 area has not opened its fifth floor, because of lack of commercial retail interest.
On the other hand, the office space segment has benefited from the rise of e-commerce and technology firms.
International property company CBRE Vietnam, in a recent report, said that the rental fees in office buildings have continuously increased and that third-quarter prices were higher than in the previous quarter.
JLL Vietnam also has released a study that shows that the majority of companies renting new space are IT-related companies. JLL predicts that technology related companies will occupy 15% ~ 25% per of total rentable office space within the next 10 years, representing a huge increase over the 5% ~10% ratio they have occupied during the last three years.
Stephen Wyatt, general manager of JLL Vietnam commented on the company’s recent report and said, “Nowhere is the technology sector’s increasing demand for office space more evident than in Viet Nam. The country is catching up with the rapid development of other regional markets thanks to its young, dynamic, tech-savvy business people. We have seen a significant increase in demand from technology and co-working companies over the past three years and expect this trend to continue over the next five years,” he said.
Technology companies have become an important group of tenants, and investors and developers need to build new office space to keep pace with demand and are often the first to lease space in the latest office buildings. They are especially interested in “smart buildings” that allow them to maximize access and hours of operation for their staff and will not move into buildings that have limits on access, electricity or other facilities in the building.
Startup and technology companies are also looking for offices that are close to public transport and amenities and services. They encourage their staff to move close to the office so that they can maximize work and personal time and believe that the more staff who live, work and play in close proximity to the office creates the best environment for growth.
Integrating flexible co-working space into buildings can also boost demand for contracted office space. Often times companies that are involved in new projects need additional staff for project development and rather than moving into larger spaces for the entire company, co-work space in the building provides a flexible option for these companies.
Real estate experts and developers predict that over the next 10-years, that co-work spaces and technology companies will continue to dominate the market as online education, game, marketing and media companies develop and expand. Companies will look for different office spaces based upon their DNA, whether its flexible co-work spaces, or fixed office spaces in office buildings or even shopping centers.