A Ho Chi Minh City People’s Committee representative told VIR that DB Court was the first successful project having moved from an office area to serviced apartments. As a result, other office developers were seeking approval to follow in Dragon Fly’s footsteps.
Vo Trang, leasing manager of CBRE Vietnam, said: “Due to the continuing downtrend of Ho Chi Minh City’s office for lease market and the stable growth of the serviced apartment segment, many office developers, especially developers of small-scale office projects would like to convert their office for lease area into serviced apartments.”
Trang said while Grade A class office-buildings in District 1 were struggling to attract tenants with the rents ranging at $26-$27 per sqm per month, after being converted into serviced apartment project, DB Court could easily find customers with the rents planned to be offered at around $30-$31 per sqm.
Knight Frank’s latest report said that in the context of the current difficult economic conditions, the real estate market had been significantly affected. Nevertheless, the serviced apartment segment continued to show resilience with high occupancy rates and stable rents. Occupancy rates of serviced apartment sector in the second quarter represented 90 per cent for Grade A and 82 per cent for Grade B buildings.
The current average asking rental rate for Grade A stock is approximately $29-$35 per sqm per month and $19-$25 per sqm per month for Grade B, according to Knight Frank’s report.
“We are continuing to see an increasing demand trend towards one-bedroom and two-bedroom units as budget constraints are a more pertinent factor. Serviced apartments are no longer focused in CBD but are expected to continue to extend to surrounding areas such as Phu Nhuan district, District 2 and District 7 due to lack of land opportunities in District 1,” said Knight Frank.
However, according to CBRE, the serviced apartment market in the second quarter was “discouraging” with vacancy trending upwards and asking rents trending downwards by every measure.
Grade A rents did not drop as much as Grade B rents, though the Grade A segment witnessed a bigger increase in vacancy, currently at 17.3 per cent. This showed that in the current market conditions, the more affordable the rents are, the quicker the units can be absorbed.