The recent increase in industrial development in the northern provinces of Bac Giang, Thai Nguyen, and Hai Duong promotes future supply in the belt areas of Hanoi, local insiders have said.

Fraser Suites Hanoi, one of the premium serviced apartment brands in the city. Photo: Frasers Hospitality

Localities surrounding the capital city such as Bac Giang possess all the converging factors to attract large foreign investors such as Foxconn and other supporting corporations to settle and expand their production scale in the province, thereby boosting the demand for industrial and urban land. 

Matthew Powell, Director of Savills Hanoi said the next belt areas will be the locations of a series of new serviced apartment projects from big brands, including Fraser Suites’ project in belt area No.3, which runs through many districts from the south-eastern to the west-eastern part of Hanoi. 

"This is a prominent trend for the serviced apartment segment of the city," he added.

Foreign experts working in industrial zones are the main source of demand in the serviced apartment market, according to the director of Savills Hanoi. The Covid-19 pandemic that broke out in industrial zones in the northern provinces of Bac Giang and Bac Ninh in May 2021 has negatively impacted the demand for the segment.

South Korean tenants surpassed those from Japan to make up the majority in districts of Hoan Kiem, Cau Giay and Nam Tu Liem, according to the property consultancy firm.

In Quarter 2, 2021, the supply of serviced apartments in Hanoi reached 5,500 units, a sharp increase of 20% against the same period of last year. 

In particular, the launch of two Grade B projects in Ba Dinh and Dong Da districts, after a long wait, provided 136 apartment units. The share of Grade A properties has been stable over the past five years at 53%, mostly managed by Ascott and the newcomer Oakwood, a Savills Hanoi report noted.

Rental prices for serviced apartments in Hanoi in the second quarter (Q2) fell 8% to $24 per square meter per month. Cau Giay District has maintained the highest rental average rate, reaching $32 per square meter in the first six months of 2021. Dong Da District took second place after the Grade A Novotel Hanoi Thai Ha project went into operation.

The capital’s average occupancy rate of serviced apartments in Q2 stood at 69% with the suburban district of Gia Lam recording a significant increase, 32 percentage points quarter-on-quarter. It was partly thanks to the supply of Vinhomes Ocean Park S2.17 to meet the high demand of international students and South Korean experts working in the neighboring areas.

Do Thi Thu Hang, Senior Director of Advisory Services at Savills Hanoi said: "The serviced apartment market capacity has been stable in the past years, partly due to the number of foreign professionals permanently staying here."

Novotel Hanoi Thai Ha is located at the heart of the city. Photo: Accor

Regarding future supply, an estimated 2,400 apartment units from 19 projects will be on sale, of which foreign management companies will hold 96% of the future units. Recently, CapitaLand has completed the $155 million deal to acquire the Somerset Metropolitan West Hanoi project with a scale of 364 apartment units.

Savills Hanoi forecast, in the coming time, the demand from foreign workers returning to Vietnam, mainly high-tech workers and highly experienced experts, will surge. Especially when Vietnam is piloting the plan to reduce the isolation period to seven days for incoming people who are fully vaccinated starting this July. 

“The recovery of the serviced apartment market depends on the vaccination rollout progress as well as the shift in foreign direct investment (FDI) flows,” Hang said.

Despite many difficulties, positive macroeconomic results in the first months have helped boost the market's outlook.

According to the General Statistics Office, in the seven months of 2021, Hanoi ranked sixth in the country in terms of registered FDI capital with $827 million. Besides the capital, the northern port city of Haiphong, provinces of Quang Ninh, Bac Giang, and Bac Ninh were among the top 10, contributing 25% of total registered FDI capital.