Amidst Low Demand, Shophouse Rents in HCMC Experience a 30% Plunge
Shophouse rents in Ho Chi Minh City have experienced a significant 30% decline this year. Despite this, many shophouse locations remain unoccupied due to a lack of tenants, primarily attributed to the prevailing economic difficulties. For instance, Lan, who owns a shophouse in District 1, recently rented it out for VND65 million per month, a 26% decrease compared to pre-Covid-19 rates. She had left the property vacant for two months as she struggled to find a tenant. Lan explains, “If I don’t lower the price, both renters and I will face difficulties. I won’t have tenants, while potential renters won’t have enough resources to restart their businesses.”
Le Thi Rieng, a road in District 1 that used to be bustling with hair salons, nail spas, and cosmetics stores, now appears deserted as many businesses have closed down over the past three years. Similarly, on Cach Mang Thang Tam road, another location in District 1, a shophouse that was previously rented for VND200 million ($8,228) per month now leases for VND130 million, a 35% decrease. The owner is also attempting to sell the property but has yet to find a buyer.
Numerous shophouses with two or three floors in Ho Chi Minh City are facing the same situation, with “vacancy” signs displayed for months. According to a second-quarter report by the listing platform Batdongsan, interest in downtown HCMC shophouses has declined by 6% year-on-year due to challenges in consumer markets. A survey conducted by property consultancy Savills indicates that shophouse rents in downtown HCMC have been decreasing by 8% annually since 2019. The survey also highlights that occupancy rates for shophouses with an area of around 500 square meters are currently at their lowest point since the last quarter of 2022.
Phuong, a broker in the city, reveals that many prime locations have remained unleased for nine months or longer, leading landlords to reduce lease rates by 30% for at least the first 12 months in order to attract tenants. Landlords are also offering lower deposit requirements, reducing them from three to six months’ worth to just one or two months. Some even provide additional incentives such as free internet or water bills.
Property analyst Le Quoc Kien explains that the pandemic has forced numerous shops to close down, and the economic challenges of this year have made it difficult for them to resume operations. Additionally, the shift towards online shopping has reduced the demand for brick and mortar stores. Kien forecasts that rents will continue to remain approximately 20% lower than the rates in 2019 until the second quarter of next year.