red, and the company went on to report a dazzling second-quarter and first-half performance. Bouncing back Right now, just about everything is going Vincom’s way. Retail sales in Vietnam enjoyed year-on-year growth of 11.7 per cent in the first half of calendar year 2022. The tourists have started to come back, albeit at a modest rate, with more than 600,000 visitors reported for the first six months of the year. The inflation outlook for Vietnam is cautiously positive, compared with that of some of its neighbours, which means there could be less upward pressure on interest rates than elsewhere in the region. Best of all though, as far as Vincom Retail is concerned, the locals are returning to stores: footfall is up by more than a third compared with a year ago.  Vincom’s stellar second-quarter and first-half results for 2022, reported on 28 July, beat the expectations of most industry analysts, even the more optimistic ones. Company revenues in the second quarter increased 23 per cent, year on year, while its revenues from leasing and related services grew by 33 per cent. After-tax profit almost exactly doubled. The rental market in Vietnam, particularly in the CBDs of its largest cities, is rebounding well after the dog days of FY21. CBRE data shows monthly rent in downtown Ho Chi Minh City has now breached US$200 ($281) per square metre for the first time. The optimistic outlook has led retailers in the Vietnam region to dust off their pre-pandemic expansion plans and accelerate store openings. Vincom currently has 1.7 million sqm of gross floor area (GFA) in operation, spread across 83 shopping malls. It is aiming for 2 million sqm by the end of 2023. In the four years from 2015-19, the company opened malls at a breathtaking rate, launching more than 50 of them in a sprint to become the dominant mall player in the Vietnam market, which would give it not only the biggest market share in this nation of almost 100 million people, but also the largest-scale platform for domestic and overseas retailers to roll out their store fleets. The pace of development slowed in the last two years, but the company has recently launched a mega mall in Hanoi in April and two smaller centres in Bac Lieu and My Tho, both in the south of the country in June. Vincom now has a footprint in 44 of Vietnam’s 68 cities and provinces (the country has 63 provinces and five self-administered cities). A nagging vacancy problem Not everything is hunky dory. The portfolio is still struggling with vacancy problems: occupancy is a modest 82.5 per cent portfolio-wide, which represents a decline compared with both the first quarter of this year and the same quarter a year ago. Its smaller formats, Vincom+ (73.1 per cent occupancy) and Vincom Plaza (77.8 per cent occupancy), are particularly problematic. The Vincom Plaza format accounts for 50 per cent of company floorspace. The occupancy problem is not a result of too much new supply, as is often the case in the retail industry. Until the arrival of Vincom Mega Mall Smart City in Hanoi in April, the capital had experienced five consecutive quarters without any new mall space coming online. In Ho Chi Minh City, there hasn’t been any new supply either.  However, that may be about to change. Vincom’s major competitors, Lotte and Aeon, both have large-scale projects due to open in the 2023-24 time-frame and there will be an uptick in Ho Chi Minh City too over the next couple of years. The main shopping centre operators are not putting all their eggs in the traditional shopping basket though. Provision will be made for click-and-collect in new malls and existing ones will be backfitted for it. Vincom itself operates four concepts. It has a 10,000-40,000sqm GFA format for high-density areas of CBDs (56 malls in total), a smaller format called Vincom+ for secondary locations (15 malls) and Vincom Center, a CBD concept with a GFA of 40,000-60,000sqm. However, it is the fourth concept – the Mega Mall – that is generating the most excitement. So far, there are five of these in operation, ranging from 60,000-150,000sqm of GFA. The recently opened Smart City unit in Hanoi has a net leasable area of 49,000sqm, featuring shopping, dining, and entertainment. The entertainment component includes an indoor F1 racetrack and a golf simulator. Two more mega-malls are due to open in 2023: Ocean Park 2  – The Empire (following on from the success of Ocean Park 1, which was an award-winner) and Grand Park. Also to open in 2023 are three Vincom Plaza units: at Ha Giang and Dien Bien Phu in the north, and Dong Ha on the central coast. Vincom is competing fiercely with Lotte and Aeon for high-profile retailers planning their expansion in Vietnam, including Uniqlo (12 stores so far), Muji (a single store in Ho Chi Minh City), Charles & Keith (24 stores). Health and beauty retailers like Lush and Sephora also have their foot in the door in Vietnam, with the latter having just opened an e-commerce store that may be a trial balloon for entering the market with physical stores. Bright outlook, but the competition will be intense  Vincom’s current performance in the market and its national reach suggest that its strategy of trying to nurture domestic chains and attract global ones is poised to bear fruit. Moreover, the rent relief and more lenient terms that Vincom was compelled to provide tenants during FY21, when the Vietnam government put into effect the region’s most severe Covid-19 lockdowns, can now be rolled back.  But the competition is lurking. Korea’s Lotte Mart has been in the Vietnam market since 2018 with ambitious growth plans, although it has had to moderate these because of the pandemic. Meanwhile, Japan’s Aeon Mall, which already has a beachhead in Hanoi and Ho Chi Minh City, plans to increase its footprint with projects in other localities. It wants to have 25 shopping malls across the country by 2025, up from its current network of six. So Vincom, by the numbers, has a dominant position in the market, but it cannot afford to rest on its laurels.