The dominance of Grade A in Tay Ho District
In the first quarter of 2019, Hanoi serviced apartment market welcomed The Hanoi Club – Hotel & Lake Palais Residence with 52 rooms after its renovation period. The total supply increased to more than 3,800 units. Regarding supply by location, Tay Ho District dominates Hanoi’s serviced apartment market, accounting for nearly 30% of total supply. This is followed by Ba Dinh District with about 27% of total number of units.
Grade A segment comprises 72.6% of total number of units in Hanoi and is mostly located in Tay Ho district. While nearly 30% of grade A serviced apartments are located in Tay Ho district, no project has been recorded in Hai Ba Trung, Dong Da and Long Bien districts. This trend is expected to continue in the next three years when more future serviced apartments are expected to be open in Tay Ho district. 8 out of 12 future projects are expected to be Grade A and open in this area in the next three years. As a result, the market is forecast to be more competitive with increasing demand on high quality and professional management.
Positive signal in market performance
Compared to the previous quarter, Hanoi serviced apartment market recorded a 0.7% increase in asking rent and an increase of 2.4 ppts in occupancy rate to 84%. Specifically, the occupancy rate for Grade A increased by 2.9 ppts q-o-q to 85.1% while Grade B improved 1.1 ppts q-o-q to 81.3%.
The performance portrayed a favorable growth across all grades in Q1 2019. The average asking rent of Grade A increased slightly to US$33.2 per sq.m per month, up by 0.1% q-o-q and 1.1% y-oy. Grade B experienced an increase of 1.9% q-o-q and 2.1% y-o-y.
Ho Chi Minh City market scene
Grade A serviced apartment projects are mainly located in large office building clusters, residential areas and shopping centers in District 1 and District 3. These Grade A projects usually offer a nice river view or a city view. However, new serviced apartment projects have recently been expanded to suburb areas such as District 2 (Thao Dien, a popular area for Western singles), District 7 (Phu My Hung New Urban Area with tenant focus on families from the Asia-Pacific region) and Tan Binh (close to the airport and convenient for crew members). District 2 and District 7 are now considered to be the two most hectic areas in Ho Chi Minh City with a lot of buy-to-let apartments.
Currently, Ho Chi Minh City has a total of 39 Grade A&B serviced apartment projects with more than 5,200 units and an average rent of USD 3 per sqm per month for Grade A apartments and USD 32 per sqm per month for Grade B.
Ho Chi Minh’s CBD area (District 1 and District 3) accounts for the highest percentage of total supply, most of which are Grade A projects. District 2 and District 7 take second place and third place, accounting for 12.0% and 21.0% of total supply, respectively. While the majority of large projects in District 7 are located in the Phu My Hung New Urban Area, projects in District 2 are scattered in the Thao Dien area, along the Hanoi Highway and Diamond Island.
In the southern area of Ho Chi Minh City, including District 4, District 7, District 8, Nha Be, Binh Chanh and Can Gio Districts, there are four serviced apartments projects from both Grade A and B with a total of 837 units.These projects are all located in District 7 and there are currently no projects developed in Districts 4, District 8, Nha Be and Binh Chanh Districts. In 2019, Nha Be is expected to have 60 serviced apartments from The Park Residence project. The average rent in District 7 is USD 34 per sqm per month, equivalent to USD 2,700 per unit per month. Serviced apartments in the south of Ho Chi Minh City have become more attractive, partly due to intense infrastructure investments and better transportation upgrades of the area. The occupancy rate in this area was over 80% in 2018. Rental demand in this area comes mainly from Japanese, Korean and Singaporean expats.