f the two monster metros, a lot of retailers are not yet convinced the big money is out there. Vincom’s shophouse sales to the rescue Vincom Retail, Vietnam’s biggest mall operator, is nonetheless waxing optimistic about this year, after turning out full-year revenue in FY23 of 9791 billion VND (US$400.9 million), up 33 per cent on 2022. The leasing revenue part of that was 7796 billion VND (US$319.2 million), up 14 per cent on the preceding year. In the fourth quarter, however, leasing revenue broke the growth trend: it was slightly down on the fourth quarter of 2022, and total company revenue gains were instead clawed out from a combination of the sale of shophouses in Vincom’s property inventory, and brokerage revenue. And it was the shophouse sales that drove a strong increase in gross profit. The lower leasing revenue represents something of a tailing off in the underlying leasing business as the year came to a close. Although portfolio occupancy has continued to improve and is now 84.8 per cent, the situation is far from uniform among the four formats the company operates. While its two formats for high-density areas in the major cities, Vincom Center (occupancy 95 per cent) and Vincom Mega Mall (89.1 per cent) are doing OK, the other formats, Vincom Plaza (80.4 per cent occupancy) and Vincom+ (71.7 per cent occupancy, down almost two percentage points on the year) are not faring as well. So underneath the bravado about future prospects is the nagging gap in occupancy – and the quality of that occupancy – between city and country. The company, to its credit, has been clear about its priority of generating more value out of existing properties and there were no new mall openings during the year, leaving the mall count at 83 and total gross floor area (GFA) at 1.747 million square metres. Vietnam still among the region’s top performers It has become commonplace among retail, real estate and economic commentaries on Vietnam to say, in effect, things aren’t going as well as they were and weren’t what we had expected as things normalised in the past year, but, hey, we are doing better than anyone else in the region. And so it was again with Vincom’s leadership when summing up the company’s and Vietnam’s performance in the second half of last year.  National retail sales grew by 9.6 per cent last year, about half the rate of 2022, but showed an improving trajectory toward the end of the year, following a rapid government reaction to stimulate the struggling economy. Percentage growth in retail sales is all very well but the fact remains that Vietnam is still poor and there isn’t enough spending power in secondary cities to support a lot of mid-end retail.  Thailand makes a good counterpoint: Thailand is also a developing country but its GDP per capita (a rough proxy for income per capita) is almost twice that of Vietnam and there are a number of provincial cities – not to mention the tourist strongholds – that can support a limited number of mid-market national and international retailers.  This, together with the fact that Thai mall operators also control powerful retail brands, makes their job of filling space in secondary cities much easier. Vietnam doesn’t have the same dynamic but it will get there soon if the government continues to push high-growth policies. HCMC and Hanoi Meanwhile, there is plenty of excitement to go around in the two big metros. CBRE states that the retail vacancy rate outside of the Ho Chi Minh City CBD edged up in the fourth quarter, but remained low in the CBD, where rents are growing strongly, partly because of interest from high-end brands and partly because of the positive noise created by some new mall supply coming online. Vincom itself is expected to bring two major projects to market in the city this year – in District 8 and District 9, both outside the CBD – that will add 70,000sqm of net leasable area. Meanwhile, in Hanoi, rents are also surging and in the CBD it is tough to find vacant space, especially in malls. Luxury brands are also showing increasing interest in Hanoi, and indeed Vincom itself was upstaged with the recent opening of Lotte Mall West Lake Hanoi, which boasts 230 stores and 25 global brands, including luxury staples like Chanel and Dior. Citing Vietnam’s National Tourism Administration, Vincom says international arrivals reached 12.6 million last year, compared with 3.7 million in 2022. That seems like a big leg up but it is still way lower than the pre-pandemic level, primarily because of the continued absence of visitors from China. Partly offsetting this is that domestic travel is now well ahead of where it was in 2019. Vincom, with its large portfolio spread around the country, needs more high-quality retailers to venture into Vietnam’s wild blue yonder. The situation regarding retailer expansion might be eased a little by the recent relaxation of Vietnam’s rules for expansion of foreign retailers in the country, but in the first instance this will again be primarily beneficial to Hanoi and Ho Chi Minh City. Vincom plans to bring six new projects to market this year: Mega Mall Grand Park, Mega Mall Ocean Park 2, both in Ho Chi Minh City, and four malls in the provinces: in Ha Giang in the far north near the Chinese border, in Bac Giang just north of Hanoi, in Dien Bien Phu in the far northwest, and Dong Ha Quang Tri on the central coast. None of the four exceeds 15,000sqm of gross floor area, so, wisely, the leasing goals are modest.