Spending $18,000 a Month to Rent a House Just to Sell Coffee

Starbucks Reserve in Ho Chi Minh City’s District 1, Vietnam, has recently announced its closure after seven years of operation. This unique Reserve store, the only one of its kind in the city and the second in the country, will be shutting its doors, with the other remaining in Hanoi’s House Church Street.

Starbucks Vietnam shared that after careful consideration, they regret to inform that the Starbucks Reserve store on Han Thuyen Street will cease operations from August 26th, 2024. They assured customers that Starbucks Reserve will return at an alternative location soon.

Real estate brokers are currently advertising the 210-square-meter property at 11-13 Han Thuyen for rent at a price of 30,000 USD per month, approximately over 750 million VND. A broker shared that the previous rent in 2017 was around 18,000 USD per month.

The property consists of a ground floor and two upper floors, measuring 8.4 by 25 meters. It is located near the Notre-Dame Cathedral and is suitable for a variety of business types, including F&B chains, large brands, and representative offices.

While some listings offer the property for rent at a premium, others are more flexible, with one listing mentioning a price of 746.4 million VND per month, negotiable, and another listing it at only 490 million VND per month.

Cushman & Wakefield’s survey from late 2023 revealed that Dong Khoi Street, adjacent to Han Thuyen Street, has the 13th most expensive rental rates globally.

Vacant Commercial Spaces in Ho Chi Minh City

Ho Chi Minh City still has a significant number of vacant commercial spaces, especially in the central areas. In the downtown districts of District 1 and District 3, there are plenty of empty storefronts.

However, compared to a year ago, the mass exodus of businesses has cooled down. While some busy streets still display “for rent” signs, others are undergoing renovations or preparing for new store openings, indicating a slight improvement in the market.

Nonetheless, the overall recovery in rental demand remains sluggish. Businesses continue to relocate from the central areas to the outskirts to reduce costs, resulting in a decrease in vacant spaces in peripheral areas while central districts struggle to find tenants.

The once-thriving market for rental shophouses in Ho Chi Minh City has taken a turn, with landlords no longer holding the upper hand. It is predicted that this situation will persist throughout 2024, as market demands have shifted. Some analysts even suggest that shophouses may never regain their pre-2019 glory.

Vo Thi Khanh Trang, Deputy Director of Research at Savills Ho Chi Minh City, offers a short-term outlook, stating that the market may continue to face lease terminations or downsizing, and finding new tenants will be challenging. Tenants now have the advantage of choice and can adapt to changing consumer behaviors by opening stores in malls or expanding their online presence.

However, in the long term, Trang remains optimistic about the market’s recovery, expecting positive signals as the economy rebounds.

In contrast to the gloomy atmosphere on the streets, retail spaces in shopping malls are bustling, with high occupancy rates. Cushman & Wakefield’s survey reveals a 90% occupancy rate in Ho Chi Minh City’s malls, remaining stable over the year.

The average rental rate is 53 USD per square meter per month, a slight decrease of 1.5% from the previous quarter but a 3.6% increase from the same period last year.

This can be attributed to the partial or full operation of new and renovated malls with good occupancy rates. Additionally, some projects have successfully restructured their tenant mix, attracting large-scale tenants in supermarkets, furniture, fashion, and F&B, contributing to the overall improvement in rental rates.