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 slightly to 6.1% p.a. for the coming five years. It has though suffered from two recent spikes of high inflation when economic challenges forced it to weaken its currency. Hence Vietnamese interest rates have been at comparatively high levels and mortgage rates are currently in the low double digits. Oxford expects the policy rate to move from the current 6.3% to 6.8% by 2023 and sees a healthy CPI averaging 4% p.a. in the five-year outlook. Although agriculture and domestic consumption remain sizable drivers of economic growth, the country’s outlook is increasingly dependent on manufacturing and export trade.
Data points through end of February 2019. Change represents month-over-month change.
The Shopping Center vacancy rate in the Hanoi CBD at the end of 2018 was below 1% (CBRE) with vacancy in the suburban malls a little higher. Rental growth has been recorded in the prime retail assets of Vietnam’s capital since the GFC, albeit with rents flatter in the past three years. However, sixteen new projects set to deliver in 2019 may challenge these conditions. For Ho Chi Minh City, vacancy of 3% in the CBD and around 9% in the suburban areas (CBRE) has kept rental growth in check. An additional nine new projects set to deliver this year and next will likely give retail tenants plenty of choices for their space expansion plans. Brands from Taiwan and Hong Kong have been notable among retail expansions in Vietnam lately.
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