A residential property project on Le Trong Tan Street, in Hoai Duc, a western outer district of Hanoi, was completed and handed over in 2016 with five floors of designated commercial space totaling nearly 20,000 square meters.
The project’s investor had envisioned that the floors will be home to multiple utilities such as banks, a mall, and food courts, but after nearly four years of operation, 70 percent of the project’s retail space is still vacant.
Although the operator has tried several tactics such as dividing up the commercial space into smaller lots to attract smaller shops and kiosks, and offered assistance with loans and rents, the project has still received little interest from businesses and merchants.
Not far away, another apartment project completed four years ago with three commercial floors designed to hold hundreds of kiosks and shops is facing the same situation.
The investor has many times advertised commercial space here at prices of between VND12-14 million ($519-605) per square meter, for lots between 50 to 300 square meters, but two thirds of the mall area is still empty. Many shops which saw little business have also closed.
Some malls near Hanoi’s Ring Road No.3 have also reported that over half of their commercial space has not been taken up, despite having operated for nearly two years.
According to real estate management firm JLL, the majority of developers of apartment projects do not have the experience and expertise in developing commercial real estate, and so are unlikely to have planned retail space that matches the size, area, and characteristics of the residential project and the surrounding area.
Retail space in suburbs usually can only attract residents inside the apartment project in which it is located, it is difficult to fill more than two floors with shops. Meanwhile some developers have designated up to five for commercial space, said Pham Duc Toan, General Director of real estate firm EZ Property Vietnam.
In addition, many investors lack the skills to attract tenants and buyers, he said. A number of shopping centers operate like a traditional market, without rules, management and quality standards. This is also a reason why it is difficult to attract tenants and buyers, Toan added.
According to JLL, it is also hard for investors to find tenants to set up supermarkets and showrooms in suburban areas because the density of residential projects here is high, meaning that tenants are reluctant to open shops too close to competitors.
Investors need to reduce rents to attract more tenants, since filling vacant space should be one of their biggest priorities right now, Toan suggested.
