Developers are Looking at Serviced Apartment to Provide a Solution for the Lagging Sales

Chi Tran Research Manager HCMC at Cushman and Wakefield Vietnam refers to the latest research data on the Serviced Apartment sector and predicts that the market will see the trend continue where many developers attempt to transfer the use/ purpose of apartment for sale projects into apartment for lease, hence there will be expected pressure on serviced apartment rents.

Q3 saw no new Grade A and Grade B serviced apartment buildings launched. End of the third quarter, total Grade A stock reached approximately 700 units, while Grade B stock reached 1,800 units. District 1 makes up 49% of all total supply.

Q3 asking rents continued to decrease. Average rent for Grade A was VND637,000 per sqm per month (equivalent US$30.30, all rates are VAT exclusive, service charge included), showing a slight decrease of 1% q-o-q and remained unchanged y-o-y, while average asking rent for Grade B reached VND472,000 per sqm per month (equivalent to US$22.50), a decrease of 1% against Q2 2012, and 12% decrease against the same period last year. Occupancy rates for Grade A in the third quarter increased by 1% q-o-q standing at about 92%. Occupancy rate for Grade B decreased 3% q-o-q and reached around 82%. District 1 continued to be the priority choice of tenants and records the highest occupancy rate at 89% this quarter even in light of having the highest rents.

Competition from other sectors such as apartments for rent will also place pressure on this sector says Mr. Cheneval…. “Developers are looking at this sector to provide a solution for the lagging sales however too much development will result in an oversupply”. The number of apartments that are available for lease has increased, especially in District 1 and the CBD surroundings, such as District 2, District 7, and Binh Thanh District. While the demand at this time is strong there appears no real panning and monitoring of unit completion numbers. Mr. Cheneval notes that many apartments are well managed but there is a growing concern from tenants that quality of services and amenities are and will remain first class.