Entry into the World Trade Organization will cause drastic changes to the real estate market in Vietnam with the most tangible effects on the retail segment.
Vietnam has committed to reduce tariffs on imports over the next five to 12 years for 4,000 items across many industries, such as televisions, air conditioners, washing machines, footwear, garments and textiles.

In the wholesale trade and retail services market, a joint venture with Vietnamese partners is still the law and foreign capital contribution shall not exceed 49 per cent on accession. But as of January 1, 2008, the capital limitation will be abolished and one year later foreign retailers will face no limits except for the permission to opening more than one retail outlet. The same rules are applied to franchising services.

“The retail sector has seen a tremendous amount of interest from international brands looking to enter the market off the back of Vietnam’s pending entry into the WTO. This will only help strengthen a very young but optimistic retail market,” said Mark Farquhar, associate director at Chesterton Petty Vietnam.

“We optimistically await expansion of the current retailer sector, which in turn will provide further choice for the existing Vietnamese consumers,” he said.
Marc Townsend, managing director of CB Richard Ellis, said the commitments would allow more international retailers into the lucrative environment, distributors and would permit franchisers to come and expand their distribution network. More supermarkets and specialised shopping centres would also be opened and demand for luxury shopping retail space in both shopping centres and on downtown streets for stand-alone shops is on the rise.

He also said there would be pressure on the availability of high quality retail space and as a result rents would tend to increase.

While new retailers in this expanding market are still exploring the markets, demand for retail space is obviously rising as established businesses are steadily expanding. Last week, Metro Cash & Carry opened its seventh store in Vietnam and Saigon Coop Mart opened its 17th store in the South.

Parkson has leased out the TD Plaza in Haiphong to open its second store while Vindemia took the EIE Centre in Haiphong and Vinh Trung Plaza in Danang to expand its operations across the country.

Farquhar said that finding prime inner city locations would remain a big issue for retailers with only very limited opportunities available in these areas. However, with the emergence of sub-regional shopping centres such as Saigon South in Ho Chi Minh City and Syrena and Ciputra Mall in Hanoi “we will see a positive change in the retail landscape, with more focus on providing convenient local centres for residential customers in the mid to outer districts,” he added.

As market access to local banking, insurance, securities and entertainment services is more open under WTO rules, more foreign companies will be able to enter Vietnam, triggering demand for residential and office space.

Townsend also that said as demand for serviced apartments and offices outweighed supply, rents would remain high in the years to come.

There would also be an increasing number of foreign manufacturers, assembly plants in high tech, electronics and heavy industry to come and international logistics companies to invest in container ports. As a result, more industrial parks would be developed but prices would remain unchanged as supply can meet demand, he added.

Source: Vietnam Investment Review