The cautious return of the retail and office segments

VCN – The instability increased in the real estate market due to the Covid-19,causing many companies in the industry to suspend operations to monitor the situation, leading to rental and investment activities slowing down. However, when the blockade measures started to be loosened in many markets, rental and retail offices are seeing new developments, albeit very cautiously.

the cautious return of the retail and office segments
Retail segments are heavily influenced. Photo: H. Anh.

Office leasing growth slowed down

After the Covid-19 pandemic, the terms of office rent tended to be relaxed, the pandemic situation in the first quarter of the year also brought more favorable terms for tenants. Many tenants choose to extend or delay expansion to cope with instability.

As tenants became more cautious, rental growth slowed across most of the region in the first quarter of 2020. The instability increased,showing more tenants are approaching landlords to reconsider rents.

In Vietnam, buildings with lots of vacant space may need to consider rental strategies to attract tenants. In the next twelve months, the average rent may increase at a slower rate.

Funding management and business plans have become the top goals of businesses. The office market in the next few months will focus on preparing for a safe re-entry, phased in and following local government guidelines.

According to JLL experts, in the short term, businesses will find ways to optimize space to reduce costs.

“Looking further to the medium and long term, we do not expect a big change in office demand. Instead of completely eliminating office space, JLL noted that some companies have begun to change the design of the office, offering more options in the type of space that employees can choose to achieve the highest yield. Single jobs can be completed remotely, while traditional offices will be for teamwork or client meetings.”

Supermarket sales dropped significantly

With the retail market, declines in sales and buyer traffic are two factors that are hindering retailers’ rental demand and reducing rental activity in the market. Facing the pressure of operating costs while working hours are reduced, many retailers have approached landlords to receive rental assistance.

The policy of social distancing in Vietnam has been relaxed since April 23 and some commercial centers have begun to reopen, but now the operation is shortened and applyingmeasures for health protection such as controlling heat, disinfecting hands and wearing masks in public areas.

In commercial centers, tenants are less likely to terminate contracts due to the assistance of landlords, such as a 10-50% reduction in rental fees or consumer stimulus programs.

“Some retailers have to close and stop their businesses after the pandemic, most of them are street shops and independent businesses. Most of the retail segment is heavily influenced. Supermarkets, convenience stores, and fast-moving consumer goods businesses seem to have survived through the epidemic despite a significant drop in sales,”said the JLL study.

The pandemic also helps to increase the development of e-commerce. Most e-commerce platforms (Grab, Tiki)recorded an increase in the number of orders during the pandemic, especially for essential products.

“The e-commerce market continues to grow. I don’t think e-commerce will take away the bread of traditional retail, which will be a plus for retailers to capture. Both need to focus more on developing an online shopping platform and cashless payment,” said MsTrang Bui, Market Manager at JLL Vietnam.

According to the JLL representative, the current crisis will surely create disruption and challenges for industries in the short term. However, we believe that the Covid-19 pandemic will have a fundamental impact on the real estate market. In addition, Covid-19 pandemic is capable of acting as a catalyst in accelerating trends that already exist in the market.

By Hoai Anh/Quynhlan

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