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Developers continue the process of trying to absorb anticipated demand as the country opens up to more inbound investment.To date, Yangon’s office stock is at 112,000 sq m, with over 230,000 sq m of new projects in the pipeline, scheduled to be completed from 2014 to 2018.
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Research & Forecast Report
Yangon | Office Market 1Q 2014
Yangon prime office rents, highest in the regionDevelopers continue the process of trying to absorb anticipated demand as the country opens up to more inbound investment. To date, Yangon’s office stock is at 112,000 sq m, with over 230,000 sq m of new projects in the pipeline, scheduled to be completed from 2014 to 2018.
Meanwhile, requirements for office space continues, backed by new requirements and expansion plans although demand was dampened during Q1 2014.
As of the end of 1Q 2014, the Yangon city-wide occupancy rate improved by three precentage points QoQ to 87%, with over 98,000 sq m of stock occupied. As a result, rents continue to trend upwards although less acute than witnessed in 2012 and 2013.
Yangon currently has the highest average monthly rent in the region, higher than the average rents of all Southeast Asian cities. At present, the average prime rent in the city is at $87 per sq m.
Forecast Direction
1Q 2014 – 1Q 2015
New Supply
Occupancy
Rent
2 Research & Forecast Report | 1Q 2014 | Yangon | Office Market
Record growth in new supply; to double this yearThe market has seen a resurgence of new office developments amid political reforms that brought about renewed interest among local and foreign investors. Last year, the industry witnessed the highest annual growth in office supply totaling 32,000 sq m of leasable space. New supply is projected to double this year with 12 new buildings under way, collectively at 72,000 sq m.
Over 230,000 sq m of new projects are scheduled to be completed from 2014 to 2018. Despite the dramatic rise in stock, the sector grew from a very low base and is expected to yield an annual average of only 13,500 sq m, negligible in comparison to other major Southeast Asian cities. Moreover, office space requirements are expected to further increase while the market remains underserved going forward.
Besides the lack of sizeable supply in the pipeline, premium office buildings of international standard remain non-existent in Yangon. While most multinational companies in general prefer to be located in a prime office building, they inevitably settle with the best option in Yangon. At present, there are only four buildings in the city that are considered better in quality, namely, FMI Centre, Centerpoint Tower, Union Business Center and Sakura Tower, of which three are located in the Downtown area.
The demand for these spaces is only expected to heighten, yet the supply of quality buildings is scant. However, as developers see the need to attract bigger tenants, new projects such as SICC, Traders Square, HAGL Office Building, Crystal Tower, and Golden City Office Building, are expected to deliver decent quality spaces (~188,000 sq m) in the next three to five years.
Source: Colliers International Myanmar
Yangon Office Stock
Regional Stock
Source: Colliers International Myanmar
0
3 Research & Forecast Report | 1Q 2014 | Yangon | Office Market
Inbound foreign investment continues to fuel demandAs of the end of 1Q 2014, the Yangon city-wide occupancy rate improved by three percentage points QoQ to 87%, with over 98,000 sq m of stock occupied. The Outer City area, with fewer buildings than the others, has remained fully occupied over the last two years. Similarly, the Inner City area reached fully-occupied levels, as the remaining 1,100 sq m of vacant space were filled in the previous quarter. Downtown Yangon’s occupancy rate increased by four percentage points QoQ to 74% resulting from improved take-up rates at Centerpoint Tower and Sakura.
Average Office Occupancy Rate by Location
Source: Colliers International Myanmar
While new CBDs are being proposed outside Downtown Yangon, the area remains the city’s primary financial district that attracts major companies. Despite the worsening traffic and heavy congestion in the area, many tenants still seek better accommodation options such as Sakura and Centerpoint. With relatively lower occupancy rates than other buildings, the recent improvement in the take-up rates in Sakura and Centerpoint indicate a future growth in demand requiring similar quality office spaces, absorbing expansion and new entrant requirements.
In addition, the recent launch of the Thilawa Special Economic Zone will eventually lead to an influx of MNCs requiring office space in Downtown Yangon for administrative and management operations. The expected opening up of other large potential office occupiers such as international banks, insurance companies and securities houses over the coming few years will add significantly to demand. The recent awards of oil and gas exploration licenses will be another driver for space going forward. In the near term, the overall occupancy rate in Yangon is projected to hit the 90% mark, as more international companies establish a presence in Myanmar coupled with the expansion plans of local firms.
Yangon prime office rents: above Singapore, next to Hong KongThe dearth in supply amid heightened demand for office space are upward pressures on Yangon’s rental rates. Yangon currently has the highest average prime monthly rent in the region, higher than the average rents of most Southeast Asian cities, USD20 to 39 per sq m monthly; and it is 21% higher than Singapore’s average prime office rent. This is despite all offices in Yangon being below international Grade A building standards. At present, the average prime rent in the city is at $87 per sq m. The forecast direction remains upward and is projected to increase by over 25% in the next two years.
Regional Prime Office Rental Rates
Source: Colliers International Myanmar
Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 [email protected]
Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 [email protected]
Tony PiconManaging Director | Myanmar+95 (0) 942 103 [email protected]
Copyright © 2014 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Colliers International Myanmar Unit 7/C (6th Floor) White Cloud Building, No. (138/142) Thein Phyu Road, Botahtaung Township Yangon Myanmar TEL +95 (0) 931 491 678
485 offices in 63 countries on 6 continents
billion in annual revenue
billion square feet under management
professionals and staff
$2.1 1.46 15,800
United States: 146 Canada: 44 Latin America: 25 Asia: 38ANZ: 148 EMEA: 84
Average Office Rental Rate by LocationIn 1Q 2014, the overall average office rents in Yangon grew by 3.7% QoQ to USD75 per sq m monthly, which translates to about USD37,500 monthly rent for a 500 sq m office space. The average rental rate in Yangon has increased substantially, growing close to five times more than in 2011; and it is expected to remain a landlord’s market in the medium term. The highest rental rate is mainly at the top-tier office buildings in Downtown Yangon while average rents in the Inner and Outer City areas are at USD63 (+14% QoQ) and USD56 (+10% QoQ) per sq m monthly, respectively.
Source: Colliers International Myanmar
