Vietnam a rising retail market in Asia Pacific
Foreign investors have noted potential for retail growth in Vietnam.
Vietnam is emerging as a rising retail market within Asia-Pacific, according to real estate consultants JLL. “The market is becoming more attractive recently on the back of a rise in purchasing power, growth in consumer retail spending, and an expansion in urban population and young demographics,” Mr. Stephen Wyatt, Country Head of JLL Vietnam, told VET.
Over the last few years the market has welcomed a host of big names from Japan, such as Aeon and Takashimaya. Thai investors have also considered Vietnam a good investment destination and moved to enter the market, with prime examples being the acquisition of Metro Cash & Carry and the Big C supermarket chain by Thailand’s Central Group.
Vietnam has been among the world’s Top 30 most attractive emerging retail markets since 2008 in the Global Retail Development Index (GRDI) published annually by AT Kearney from the US. Assessing the prosperity of Vietnam’s retail market, market research companies and experts believe it has great prospects and will record high growth in the years to come.
In Asia-Pacific, 75 per cent of total commercial real estate is currently concentrated in five markets: China, Japan, Australia, Hong Kong and Singapore, according to JLL's LIM Global Real Estate Universe February 2016 report, said Mr. Myles Huang, Director of JLL’s Asia Pacific Capital Market Research, based in Hong Kong. “Coincidentally, these five markets account for around 60 per cent of Asia-Pacific GDP,” he added.
A sixth market, India, represents 16 per cent of regional GDP but is currently under-represented in commercial real estate, with only 6 per cent, while South Korea holds 7 per cent. India, however, is forecast to join this group of global real estate investment markets over the next decade as a result of rapidly expanding commercial real estate stock.
Oxford Economics has forecast that India will create a total of 80 million new jobs over the next decade, accounting for almost 60 per cent of the region’s total employment growth. Up to a half of these new jobs may be in the service sector, if the sector’s employment closely matches its share of the country’s GDP. Southeast Asia will see similar developments. “Indonesia, the Philippines, Vietnam and Malaysia together may be able to deliver twice the number of service sector jobs as China in the next decade,” Mr. Huang added.
Table: Service sector employment drives demand for commercial real estate
Many millions of these future workers will work in offices and shop in malls. Not surprisingly, the amount of Grade A office space in India is catching up with China. A rising middle class and the entry of a larger number of foreign brands also spur the construction of quality malls in major cities across emerging Asia. “Thus, it is not far-fetched to expect that India and Southeast Asia will eventually house up to 20 per cent and 15 per cent, respectively, of the region’s commercial real estate, in line with their economic might,” Mr. Huang predicted.