The serviced apartment market in Hanoi in the first quarter of 2024 continues to grow positively, according to Savills.

The supply remains stable quarter-on-quarter and increases by 2% year-on-year after two large projects, including Lancaster Luminaire and L7 West Lake Hanoi, came into operation in 2023.

In terms of occupancy, the rate of serviced apartments in the entire market increased by 2% year-on-year, reaching 82% in the first months of the year, showing that demand for serviced apartments continues to rise.

The heat of the market and the increased demand for serviced apartments are having a direct impact on rental prices. In the first quarter of 2024, the average rental price reached VND579,000 ($23) per sq m per month, an increase of 4% over the same period last year, and stable quarter-on-quarter.

Potential Land

According to Mr. Matthew Powell, Director of Savills Hanoi, there are two main factors affecting the recovery of the serviced apartment segment, including abundant FDI capital and the improvement of the infrastructure system.

Vietnam still stands out as a bright spot in attracting FDI capital. In particular, Hanoi is leading the country in attracting foreign investment capital.

According to the Foreign Investment Agency (FIA), Ministry of Planning and Investment (MPI), in the first three months of 2024, the City has attracted registered FDI capital of up to $970.8 million, accounting for 15.7% of total registered FDI capital and increased 6.1 times over the same period last year. In March, Hanoi approved the investment policy of Dong Anh Industrial Park with a total scale of nearly 300 ha and investment capital of $257 million.

Mr. Powell added that FDI capital flows into neighboring provinces also continue to create stable demand for serviced apartments in the capital. Following Hanoi in the list of attracting FDI capital are the provinces of Bac Ninh, Quang Ninh, and Thai Nguyen. In the first quarter of 2024, a number of industrial parks have been approved for investment, such as Song Cong II industrial park (Thai Nguyen), Viet Han and Phuc Son (Bac Giang).

Furthermore, attracting FDI also brings a large number of foreign experts to work and live. Data from the Hanoi Department of Labor, War Invalids and Social Affairs shows that in 2023, the Department has approved the need to employ foreign workers for 11,195 organizations and businesses, with 14,024 positions expected to be recruited. The main positions are managers, executives, experts, and technical workers.

"The increase in the number of professionals in Hanoi has created solid demand for serviced apartments, helping this segment continue to grow positively," said Mr. Powell.

In addition, in 2024, Hanoi is determined to accelerate the implementation of many key transport infrastructure projects such as Thuong Cat Bridge, Van Phuc Bridge spanning the Red River; the eastern access road of Phap Van - Cau Gie Expressway, and the route connecting My Dinh - Ba Sao - Bai Dinh will be prioritized for implementation.

"This not only contributes to the development of the infrastructure system but also increases regional connectivity, shortening travel time to Hanoi's center for experts working in industrial parks in some neighboring provinces," said Mr. Powell. "Continuous investment in improved infrastructure plays a key role in the prospects of the serviced apartment segment."

Forecast for the Future

According to Savills, in the current context of increasing demand, from 2024, a total of 3,821 serviced apartments will be recorded. In particular, two projects are expected to come into operation this year with a total of 454 units.

Tay Ho district is expected to contribute a large part to this supply, accounting for 63%, equivalent to 2,423 units from 6 new projects. In 2025, Tay Ho View Complex is expected to increase the largest supply of Grade A apartments.

Notably, international operators continue to account for the majority of the market share of serviced apartment supply in the coming time, with 87% of future supply. Some prominent projects include The Ascott, Lotte Group, Parkroyal Serviced Suites, Shila Hotels & Resorts, Hilton, and Hyatt.

"This shows the active participation of international brands in meeting the growing demand of the serviced apartment market in Hanoi," Mr. Powell noted.

The Director of Savills Hanoi also said foreign experts will often choose to rent serviced apartments managed by international operators because they meet many requirements for amenities and service quality. "Therefore, in the current competitive context, serviced apartment developers need to focus on improving construction quality and service quality to increase competitiveness in the market," he added.