Vietnam has enjoyed a strong 6.5% average annual real GDP growth rate since 2001 and the Oxford Economics base case scenario expects that pace to moderate to 5.8% p.a. for the coming five years. Still, Oxford recently upgraded its 2019 and 2020 forecasts to 7.0% and 6.6% respectively. This is very healthy growth for a large country on a regional and indeed global basis. Hence Vietnamese interest rates have been at comparatively high levels although the State Bank of Vietnam unexpectedly cut the policy rate by 25 bps to 6% in September 2019. Domestic drivers are also gaining traction with households benefitting from stable inflation and stronger wages allowing real retail sales to rise 9.5% YoY in Q3 2019 for example.
Data points through end of December 2019. Change represents month-over-month change.
Shopping Center rents have been quite flat for the past three years and in the more expensive HCMC market, prime rent levels have still not recovered to 2010 levels. In Hanoi however there had been rent level uplift post GFC until 2016 when rents flattened. HCMC retail vacancy is quite low in the CBD, at around 2%, however non-CBD vacancy has long been much higher and is currently above 8%. A strong retail supply pipeline of over 550,000 SqM of NLA is expected to deliver in the coming four year period in HCMC. Two new malls opened in Hanoi in Q4 2019 and as with HCMC the CBD vacancy rate (sub 2%) is much lower than non-CBD submarkets at just over 8% (CBRE).
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