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Retail premise leasing fees in VN among costliest in region
Both foreign and Vietnamese retailers complain that retail premise leasing fees in Vietnam, especially in HCM City, are sky high. Surveys have shown that the leasing fees in Vietnam are higher than in regional countries like Thailand, Malaysia and Singapore.
Every inch of retail premise worth its weight…
In 2006, local newspapers reported that the transfer price of one square metre of stall at Ben Thanh Market in HCM City was 230 taels of gold. The level, if converted to dollars, was 30 percent higher than the price in the Ginza area in Tokyo, Japan, considered the most expensive area in the world. At that time, a street-front house on February 3 Road in HCM City with the area of 200 square metres was priced at 1,000 taels of gold – just equal to five square metres at Ben Thanh Market.
Though gold and dollar prices have changed much over the last three years, and though the transfer price has decreased significantly, according to Nguyen Thi Loan, a petty merchant at Ben Thanh Market, ‘a retail premise is still worth several hundred thousand dollars’.
High-grade trade centres in district 1 in HCM City are now leasing at $120-150 per square metre, while it is 300-550 per square metre at Ben Thanh Market. Meanwhile, street-front shops on crossroad near An Dong Market now have the leasing fee of $1,000 per month and higher, which is equal to the leasing fee in Tax, Zen Plaza or Parkson trade centres.
If comparing the increase of the value of the retail premises and the increase of the retail premise leasing fees, one would see the leasing fees have increased more sharply. The above-said house on February 3 Road is now priced at 1,200-1,300 taels of gold, while the leasing fee of that house has soared from $2,000 to $4,500 per month.
A survey of 14 retail markets in Asia – Pacific conducted by Retail Asia magazine showed that Nguyen Kim shopping centre has the highest level of business efficiency with the turnover per every square metre there is 311.5 million dong per square metre per annum. The figure is 286.6 million dong for SJC, 224.3 million dong for PNJ and 18.9 million dong for Saigon Co-op.
Nguyen, an electronics and home appliance expert, said that the retail premises leasing fee is 700,000 dong per square metre per month, which means that the annual cost would be 8.5 million dong per annum, or approximately 50 percent of businesses’ profit. He said that the maximum profit could be 5 percent of total turnover.
At such a cost, analysts said that it would be only profitable to sell high-quality products. For example, retailers would not be able to make profit if they sold a pair of shoes at 150,000 dong and the cost was 80,000 dong. However, the situation would be different if they sold luxury products, selling a pair of shoes for 800,000 with the cost price of 250,000 dong.
Phan Van Kiet, Deputy General Director of Viet Tien Garment Corporation, which has opened a shirt shop that sells Sanciaro brand name shirts at Tax centre, said that the lowest sale price of high-grade brand name products is 650,000 per shirt and so it is reasonable to lease the retail premises with the area of 60 square metres and higher.
vietnamnet, sgtt
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