Vietnam’s retail sector has fallen from a ranking of number one in 2008 to sixth in 2009, 14th in 2010, 23rd in 2011 and is currently 32nd in the Global Retail Development Index of A.T. Kearney.

Retail space rent at hundreds of U.S. dollars per square meter is placing a financial burden on the industry players and sees them hesitate in expanding operations in Vietnam, heard the Retail Conference 2012 co-held by Nhip Cau Dau Tu magazine and Nguyen Kim Trading Joint Stock Company in HCMC last Tuesday.

Richard Leech, executive director of CB Richard Ellis Vietnam, said retail space rent in big cities like HCMC is quite high, as much as VND2-4 million (US$100-200) a square meter. Modern retail space supply is rising but its quality is not guaranteed.

However, Vietnam remains an attractive destination among the emerging markets thanks to its many potentials, he said.

This year witnesses major players in the fields of dining, entertainment and essential items continue to expand their operations in the local market. In addition to the entry of Burger King and the expansion of Domino’s Pizza, the fashion sector is also busy with Sisley, Banana Republic, Hugo Boss, Dolce & Gabbana, Christian Dior and Hermes.

Apart from commercial centers, street houses at prime sites are also preferred by retailers, especially those providing dining services.

Huynh Kim Doan, director of Eden Real, said a Singaporean company had asked her firm to find 20 locations in HCMC for it to set up a restaurant chain.

Improvement in street houses used as retail shops will continue to put pressure on rent, especially in the outskirts, said Leech.

Retail space in HCMC this year has increased by around 75,000 square meters, including 38,000 square meters from Vincom Center A, 25,500 square meters from Pandora City building and 12,000 square meters from Bitexco Financial Center.

The surging demand of foreign and domestic retailers is enough to fill up this supply, said Leech.

Retail space supply in HCMC is forecast to grow by some 200,000 square meters from now to 2015, when Saigon Center 2, SC Vivo City and high-grade condo projects like Cantavil Premier, Thao Dien Pearl and Aeon Celadon City are completed.