Serviced apartments are primarily aimed at tenants such as expats, long-term visitors, and a small number of short-term tourists. The targeting of tenants plays an important role in the selection of utilities in a serviced apartment project, which generally have a generous space with air conditioning, a kitchen, a washing machine, a work space, and a bedroom. Such apartments are also fully furnished and managed professionally, with room cleaning and 24-hour dining services.
In recent years, developers and landlords have tended to focus heavily on customizing their products based on their targeted tenants’ preferences. Tenants from the same country tend to naturally cluster, gathering in the same area if not the same building. As a result, there are several projects designed exclusively for expats from a particular country or region, such as Japan, South Korea, Russia, and Europe.
This is also an attractive point of serviced apartment products - they offer a community and unique value for expats working at FDI companies, embassies, industrial parks, international banks, and other foreign enterprises and organizations.
Grade A serviced apartment projects in Ho Chi Minh City are mainly located amid 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 built in areas such as District 2 (Thao Dien, a popular area for Western singles), District 7 (Phu My Hung New Urban Area, which has a tenant focus on families from the Asia-Pacific region), and Tan Binh (close to the airport and convenient for flight 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.
Ho Chi Minh City currently has a total of 39 Grade A and B serviced apartment projects with more than 5,200 units and an average rental of $3 per sq m per month for Grade A and $32 per sq m per month for Grade B.
Its CBD (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 and third place, accounting for 12 per cent and 21 per cent 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 around 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, and Nha Be, Binh Chanh, and Can Gio districts, there are four serviced apartments projects in Grade A and B with a total of 837 units. These projects are all located in District 7, however, and there are currently no projects developed in Districts 4, District 8, and Nha Be and Binh Chanh districts.
Nha Be is expected to gain 60 serviced apartments this year from The Park Residence project. The average rent in District 7 is $34 per sq m per month, or $2,700 per unit per month. Serviced apartments in the south of Ho Chi Minh City have become increasingly attractive, partly due to intense infrastructure investments and transportation upgrades. The occupancy rate in this area was over 80 per cent in 2018, and rental demand comes mainly from Japanese, South Korean, and Singaporean expats.
Though developers enjoy favorable conditions in this investment channel, with high occupancy rates and annual increases in rents, there remains fierce competition from buy-to-let apartments. Therefore, providing quality and professional management services is the key to success for developers and landlords alike.
Shophouses in podiums of condo buildings
Ho Chi Minh City’s real estate market reported a significant decrease in new supply of ready-built townhouses and villas last year. At the same time, shophouses in the podiums of condominium buildings were receiving major attention from investors. These properties are either sold freehold or leasehold to investors, who subsequently lease them commercially. The advantages of this product are limited supply, good location, high liquidity, high capital gain, and flexibility (private business or leasing).
The southern area has attracted and formed large domestic and foreign residential communities, which always have high demand for shopping and food. In the past, some shophouse projects were deployed in the subdivisions of Phu My Hung New Urban Area, such as The Crescent, Canh Doi, Nam Vien, Van Hoa Giai Tri, and Kenh Dao.
Currently, District 7 (including Phu My Hung) has 471 available shophouses located in the podiums of condominium buildings, which have an average rental price from $22 to $30 per sq m per month. The asking price of these shophouses is about $4,000 per sq m. Popular businesses at these shophouses are services, food and beverages, home décor, and convenience stores, with the involvement of domestic and international brands such as 7 Eleven, El Gaucho, Thea Clinic, Genshai, and Vinmart.
District 7, especially Phu My Hung, is a mature market with long-term development of shophouses in the podiums of condominium buildings. Nha Be district, in the area around Nguyen Huu Tho Street, is a new and potential market for this type of real estate property.
The remarkable increase in high-rise condominium projects as well as low-rise houses built on Nguyen Huu Tho Street (part of the city’s North-South arterial road) has created new residential communities with high demand for shopping, food, and entertainment. Some available projects such as Phu Hoang Anh, Sunrise Riverside, and Phu My Hung Saigon South Residence have shophouses in podiums to meet demand. The average asking prices for shophouses in some new condominium projects such as Sunrise Riverside and Phu My Hung Saigon South Residence are $3,652 per sq m and $2,767 per sq m, respectively.
The Park Residence project has 90 shophouses (Central Point Shopping Plaza) with intentional long-term leases. Average asking rents in the area are from $10 to $25 per sq m per month, while some projects have been quoted at $15 to $10 per sq m per month, like Phu Hoang Anh.