Serviced apartment market in Ho Chi Minh City underserved, CBRE

Nhan Dan Online - There is a huge shortage of serviced apartments in Ho Chi Minh City, according to CB Richard Ellis Group, the world’s largest commercial real estate services firm (in terms of 2007 revenue), in a press release today, adding that serviced apartments are a viable option for residential developers giving immediate cash flow and allowing developers to see units off in the future.

According to CBRE, with 81,000 expatriates residing in Ho Chi Minh City and less than 3,000 Serviced Apartments available, expats are grappling to find suitable options. In addition, of the units available less than 25% is Grade A with slightly more Grade B. The facts are clear - the market is underserved, CBRE says in its release.

CB Richard Ellis finds that in Ho Chi Minh City Grade A units between 60 – 80 square metres can fetch US$49 per square metre. Over the past 5 years, rentals have been increasing between 5 to 10% annually reflecting the high demand for serviced apartments.

In the second quarter of 2008 alone, rentals increased by 5 to 8% despite the economic slow down.

According to CBRE research, there is a total of 810,000 square metres of built up office space in Ho Chi Minh City compared to only 300,000 square metres of serviced apartments. It is expected that from now to 2013, an additional 340,000 square metres of serviced apartment space will be added to the market. However this is still a far cry from the total office space available and the higher demand for SA living. There is a huge shortage of space!

Looking around Ho Chi Minh City, clearly there are many half empty office buildings, says CBRE, forcing landlords to reduce rental expectations and/or throw in additional benefits for tenants who have ample alternatives elsewhere. The office market has softened and is definitely not looking too rosy for landlords. There is every reason for developers to re-think their building plans and enter a new arena of high end residential business where rentals are expected to reach more than US$50 per square metres in the coming year.

The long queues to purchase residential homes such as the Vista, Estella, Hoang Anh Gia Lai and Sky Garden 3 are no longer existent. New launches are rare and resale prices have also been hard hit. Yet, serviced apartments are still a viable option for residential developers giving immediate cash flow and allowing developers to see units off in the future.