Serviced apartment market warms up

Ho Chi Minh City For nearly 4 months now, many serviced apartment buildings have been fully rented thanks to the increase in short-term tourists and business travelers to the city.

A survey by VnExpress showed that in the first months of the year, two serviced apartment buildings belonging to a chain of popular (affordable) rental properties with a scale of about 60 units, located on Cuu Long Street, Tan Binh District, near Tan Son Nhat Airport, had a strong increase in capacity with an occupancy rate of up to 90%.

Standard serviced apartments, with rental prices ranging from VND680,000-750,000 per night (including a bedroom, living room, kitchen, and one bathroom), are 95% occupied. Meanwhile, 2-bedroom apartments have also had 87% bookings. The manager of this serviced apartment chain said that competitive rental prices compared to hotels have helped the system retain traditional tenants and increase new tenants.

In the higher-end segment, a company that operates 230 serviced apartments under the model of renting apartments and officetel apartments for re-renting at Landmark 81, Binh Thanh district, revealed that the number of bookings has increased sharply in the past 4 months, with the occupancy rate of the entire system reaching over 95%.

For one-bedroom serviced apartments priced at VND1.3 million per night, they are fully booked both during the week and on weekends, with an occupancy rate of 100%. Two-bedroom apartments have a booking rate of nearly 90%, attracting short-term and long-term renters and Asians (Korean, Japanese, Taiwanese). Meanwhile, apartments with three bedrooms or more have an occupancy rate of 80%, mainly favored by large families (group guests), mainly overseas Vietnamese.

The rental price of serviced apartments around Landmark 81 has also nearly doubled compared to the outbreak period. For example, a one-bedroom apartment increased from VND500,000-700,000 per night in the second quarter of 2021 to VND1.2-1.3 million per night.

Serviced apartment market in District 1, central Ho Chi Minh City. Photo: Vu Le — Serviced apartment market in District 1, central Ho Chi Minh City. Photo: *Vu Le*

Mr. Nguyen Hoang, manager of a mid-range serviced apartment building in Phu Nhuan District, confirmed that during the period before and after Tet, the number of serviced apartment tenants increased sharply, with the occupancy rate reaching 87%. From March until now, the room occupancy rate has remained above 80%, which is a profitable level after deducting operating costs. Compared to the same period last year, this business result increased by 15%.

The vibrant serviced apartment market in the first months of the year is also reflected in market reports specializing in this segment. Colliers Vietnam said that the occupancy rate of class A (high-end) and class B (mid-range) serviced apartments in Ho Chi Minh City reached 91-92% thanks to the increase in the number of foreign experts coming to Vietnam. The report of this unit did not mention the class C and substandard serviced apartment segments following the spontaneous model.

According to Savills Vietnam, the occupancy rate of the serviced apartment market in Ho Chi Minh City, including the high-end, mid-range and affordable segments, reached a positive level of 84% in the first quarter of the year, up 16 percentage points year-on-year. The majority of serviced apartment tenants are experts from Japan, South Korea and Taiwan. The average rental price of serviced apartments in the whole market increased by 7% year-on-year, however, it was still 10% lower than in the first quarter of 2019 (before the pandemic broke out).

Savills data also recorded good absorption with 79% of studio serviced apartments (one-bedroom type) leased. For two-bedroom units, 83% of the inventory was booked and 84% of three-bedroom units were leased.

Ms. Cao Thi Thanh Huong, Manager of Savills Ho Chi Minh City Research Department, assessed that the demand for accommodation was boosted earlier this year thanks to the increase in FDI (foreign direct investment) capital in the first quarter. According to her, the serviced apartment market has had an impressive recovery in the post-Covid period thanks to the return of foreign workers.

Mr. David Jackson, General Director of Colliers Vietnam, commented that the recovery of the serviced apartment market in Ho Chi Minh City in the first quarter was quite optimistic compared to the general context of the entire real estate market facing liquidity difficulties.

According to him, Ho Chi Minh City is one of three markets expected to lead the recovery of the accommodation industry in Asia. The demand for serviced apartments will continue to increase, especially in the second half of the year when Chinese tourists are expected to return. "The serviced apartment segment can take advantage of this momentum to increase the standardization of quality and services," he said.

Vu Le

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