The serviced apartment segment in Hanoi witnessed solid performance by Grade A and branded operators in the third quarter of 2019, according to Savills Vietnam.

Photo: Viet Tuan 

The market had 4,330 units, down 8 per cent quarter-on-quarter after the closure of two projects and the entry of one. Grade A had the strongest take-up while Grade B and C suffered decreases in leased units.

Average market-wide rents increased 4 per cent quarter-on-quarter and occupancy remained high at 84 per cent. Within the Grade A segment, branded operators charged 19 per cent higher for rent than non-branded counterparts.

The trend of compact units saw the market share of studios and one-bedroom units rocket from 16 per cent in 1996 to 46 per cent in the third quarter of 2019.

Tenants are not only expatriates and corporate executives with long-term leases but also individual business / MICE / leisure travelers with requests for short-term stays.

Cooperating with dynamic online travel agents, over 90 per cent of serviced apartment operators now meet monthly and daily requests instead of only annual contracts.

In the first nine months, Hanoi attracted $6.1 billion, or 23 per cent, of registered FDI. Amid the ongoing US-China trade tensions, Vietnam jumped from 23rd to 8th in investment attraction, according to the Best Countries to Invest In rankings published by the US News and World Report.

Beside traditional Japanese and South Korean tenants, other Asian expatriates from Hong Kong, Singapore, and China are expected to escalate demand.

Four projects with approximately 1,000 units will enter the market in the fourth quarter - three branded operators in Tay Ho district and one player in Hai Ba Trung district. There is no future stock registered in Hoan Kiem district due to the scarce land bank.

In Ho Chi Minh City, the serviced apartment segment reached approximately 5,800 units from 88 projects; stable quarter-on-quarter and year-on-year. One Grade C project operated by City House entered the market, providing 26 units.

Serviced apartment projects managed and operated by chains performed well, but two Grade C projects withdrew from the market due to pressure from buy-to-let apartments.

By 2022, 1,500 units will enter the market in response to growing demand for long-term stays. By the end of 2019, the CBD’s market share will increase by 2 percentage points due to the entry of two Grade B projects providing 200 units.

Future supply will be mainly in the CBD and new urban areas (NUAs), which have many commercial buildings and shopping centers catering to high-end tenants.

Stock in District 2, especially in Thu Thiem NUA, is expected to increase 9 per cent each year from 2020 to 2022; higher than the average of 5 per cent in the CBD.