Many big brands cannot afford to pay rent for central locations.

After 7 years of operation, Starbucks Reserve has returned the premises at 13 Han Thuyen, District 1, Ho Chi Minh City when the rent reached 30,000 USD per month (equivalent to 750 million VND). Previously, according to a source, this unit was renting here for 21,000 USD (about 520 million VND) per month.

In fact, not only Starbucks - a giant with a stable customer base - has had to return its premises in the center of Ho Chi Minh City. Since the beginning of the year, many other big brands have also stopped renting townhouses. In the context of difficult business, rental costs continue to increase.

At the end of this year, an F&B brand also plans to return the rented space on Nguyen Hue Street (District 1) when the landlord increased the rent by 12%. Another brand in the Thai Van Lung area said it would also return it because it could not afford the rent of nearly VND680 million per month.

Previously, Highlands Coffee also returned the premises at the corner of Nguyen Du and Pasteur. YEN Sushi closed its branch at 8 Dong Khoi. In March, MIA brand also returned the premises at 325 Ly Tu Trong (Phu Dong Six-Way Intersection). This premises had a monthly rental price of 700 million VND and has been transferred to 4 brands since 2019.

Ms. Nguyen Hong An, the owner of a beauty business, is renting a 3-storey house on Tran Hung Dao Street (District 1) for 380 million VND per month, with an annual rent of about 4.5 billion VND. According to her, the high rental cost eats into all profits, and in the past, this branch made little profit and lost a lot. Every 2 years, the price increases by 10%, regardless of whether the business makes a profit or a loss. With business becoming increasingly difficult, she said she is considering finding a cheaper rental space.

On Vo Van Tan Street, District 3, a cosmetic hospital is spending nearly 600 million VND to rent a 3-storey townhouse for business. The brand value is good thanks to its eye-catching location, but according to the manager, it is losing hundreds of millions of VND each month, of which the cost of the premises accounts for the majority.

A series of "diamond" locations in Dong Khoi, Nguyen Hue, Le Loi, Hai Ba Trung, Ngo Duc Ke... have also been vacant for a whole year because it is difficult to find customers willing to pay several hundred million or sometimes more than a billion VND for these locations.

No one is renting, but the landlord is willing to leave it empty rather than lower the price. Ms. Duong Thuy Dung, Director of CBRE Vietnam, said that the price of premises in the central area of ​​Ho Chi Minh City is 5 times higher than the average in other areas of the city. The high rent has created a wave of chain brands moving away from the center. In addition, the decline in purchasing power has also made these premises less attractive when rent accounts for a large proportion of the operating cost structure of businesses.

According to Mr. Tran Hoang Trung Tin, a consultant on selling and renting townhouses in the center, the rental price of premises, especially on central streets in District 1 and District 3, is always 3-4 times higher than the value and business efficiency it brings. With premises in the central area of ​​Notre Dame Cathedral, City Post Office, 30/4 Park..., a small premises also has a rental price from 550 million VND to 1 billion VND. With this rental price, no matter how many customers there are, the business will not be profitable, even incurring heavy losses. However, these premises have good image promotion value, so many big brands still accept them and let other branches cover the loss. Only groups with strong enough finances and business brands can "shoulder" the premises here.

Explaining the reason why many premises would rather be left empty than reduce the rent, Mr. Dinh Minh Tuan, Business Director of Batdongsan, said that valuation is usually based on monthly and annual rental value. If a premises is rented for 10 billion VND a year, then a 100 m2 house can be valued at 300 billion VND, which is normal. If the rental price is low, the value of the house will decrease. Therefore, the price of townhouses in the center continues to increase despite objections from tenants and the market.

However, Mr. Tuan said that even the price of townhouses in prime locations must follow the law of supply and demand. The market for townhouses is being strongly affected by changes in business models as e-commerce platforms explode. Previously, central streets were often gathering places for international tourists and entertainment venues. But in recent years, as consumer habits have changed, the economy has remained difficult, and the number of tourists has not improved significantly, paying large costs for a location is no longer a mandatory option.

In addition, traditional marketing methods are also being replaced by more diverse forms following the trend of "good wine needs no bush". Therefore, businesses do not necessarily have to choose to rent central locations just to maintain their brand image.

Sharing the same view, Mr. Vo Hong Thang, Deputy General Director of DKRA Group, said that businesses renting premises, no matter how "big" they are, must calculate the problem of business exploitation efficiency and brand image value. Revenue must at least break even or cover losses within an acceptable amount before calculating long-term leases, even diamond locations will have a point of touching the ceiling price. "Premises in prime locations always have customers wanting to rent, but they will only rent when they negotiate a price that they find reasonable," said Mr. Thang.

Previously, according to a report from Cushman & Wakefield, Vietnam currently has two streets in the top of the most expensive rental prices in the world: Dong Khoi (ranked 13th) with 350 USD per square meter per month and Trang Tien (ranked 17th) with 300 USD per square meter per month. Although not as "expensive", neighboring streets such as Nguyen Hue, Ngo Duc Ke, Le Loi, Democracy Square... also have rental prices of 180-250 USD per square meter per month.