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Various retail formats will continually emerge alongside the booming real estate landscape in Yangon. At present, the city has roughly 168,000 sq m of leasable retail space which includes shopping malls, hypermarkets, department stores and other retail-support components.
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Research & Forecast Report
Yangon | Retail Market 1Q 2014
New and better quality retail spaces to raise rental ratesVarious retail formats will continually emerge alongside the booming real estate landscape in Yangon. At present, the city has roughly 168,000 sq m of leasable retail space which includes shopping malls, hypermarkets, department stores and other retail-support components.
Some 80,000 sq m are currently under construction which will mainly form part of upcoming mixed-use developments. The demand for retail space remains high with the majority coming from local retailers, hence, is characterized as a domestically dominated market. Also, backed by strong local spending, the average retail occupancy rate in Yangon ended at 97% in 1Q 2014.
Meanwhile, rents are expected to grow substantially with new and better quality spaces scheduled to be completed in the medium term. The city-wide average rent grew remarkably by 11% QoQ to USD23.74 per sq m.
Forecast Direction
1Q 2014 – 1Q 2015
New Supply
Occupancy
Rent
2 Research & Forecast Report | 1Q 2014 | Yangon | Retail Market
Sizeable shopping centres geared towards mixed-use developmentsYangonites increasingly are attracted to shopping centres as they improve their design and tenant mix. Projects such as mid-scale / community malls will form part of mixed-use developments over the next three to five years, the same as retail-support components and shops anchored in many of the upcoming commercial and residential buildings.
These represent over 80,000 sq m of retail floor space currently under construction. The sizeable retail malls are geared towards master-planned developments such as Golden City, Dagon City and Junction City; while supermarket chains such as City Mart, and Orange will surface in highly commercialized zones.
AKK Shopping Mall is the latest addition to the stock with 12,000 sq m of leasable space, located in Thingangyun Township, Inner City Zone. More mid-scale to high-end retail developments will be evident in the Inner City area moving forward, due to its convenient and favourable location close to tourist attractions, and home to many wealthy Myanmar. Meanwhile, in Downtown Yangon, retail shops are prevalent as business and trading activities expand.
Despite plans for new retail establishments being laid out, shopping malls in Yangon remain small in scale, comparable only to district and community malls in the Southeast Asian region. All of Yangon’s shopping malls are less than 15,000 sq m, the majority falling under 5,000 sq m and none anchored by a department store. Most of these are designed in traditional formats with basic offerings catering mostly to nearby local communities.
The introduction of lifestyle malls will change consumer buying behavior in YangonBacked by strong local spending, the average retail occupancy rate in Yangon ended at 97% level in 1Q 2014. Retail centres in the Downtown and Outer City areas benefitted the most, reaching fully occupied levels. In contrast, the occupancy rate in the Inner City area dropped by 2.2% QoQ to 95.8%, a blip which could easily rebound over the next couple of months.
Source: Colliers International Myanmar
Yangon Retail Stock
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50000
100000
150000
200000
250000
Percentage of Shopping Malls by Size
Source: Colliers International Myanmar
Average Retail Occupancy Rate by Location
Source: Colliers International Myanmar
3 Research & Forecast Report | 1Q 2014 | Yangon | Retail Market
Despite the fact that new and modern retail centres are starting to emerge in Yangon, most consumers prefer the benefits of accessibility and convenience of frequenting nearby traditional shopping centres amid transport restrictions that limit travel to cars or public transport, with motorcycles within the city limits being banned. The introduction of lifestyle malls will, however, change the course of buying patterns in this developing city. Typically, over 50,000 sq m, these establishments are designed with varied conceptual features, tenant mix, and product offerings, creating a destination that will eventually lead to high consumer traffic. At present, this type of development is non-existent in the city.
Landlords quote over USD40 per sq m rents for upcoming quality retail developmentsUnlike the steep increases in office rents driven by inbound foreign requirements, retail centre rents in Yangon grew modestly over the last couple of years characterized by a domestically driven demand. The lack of prime retail addresses and limited upper-scale retail centres are currently downward pressures on overall rental rates which are capped at passive levels. However, with the all-time high occupancy rates highlighted over the last several months coupled with the eventual introduction of better quality retail centres in the medium term, rental rates will begin to trend strongly upwards.
In 1Q 2014 alone, city-wide average rents grew by 11% QoQ to USD23.74 per sq m. This translates to a monthly rent close to USD2,300 for a 100 sq m leasable space. The rental range hovers from USD14 to 50 per sq m, the latter being offered at Junction Square - the biggest modern retail facility in existence at the moment.
Meanwhile, landlords are now geared towards increasing rents while small to medium retailers face difficulties, struggling to keep up. In particular, rental rates for shop houses in Downtown grew more than three times year-on-year from USD16 to as much as USD46 per sq m.
Moreover, the recent leap in rents mainly transpired in the Inner City Area covering the retail centres in Dagon, Sanchaung and Kamaryut townships. The average rental rate in the Inner City area grew 20% QoQ to USD 24.1 per sq m. Meanwhile, rents in the Downtown and Outer City areas averaged USD25.2 and 22.7 per sq m respectively; rates in both locations grew by 3.0% QoQ.
Retail rents are expected to grow substantially with new and better quality spaces scheduled to be completed in the medium term. New retail projects located in prime mixed-use developments and at addresses near tourist attractions, are expected to raise the overall rent in Yangon. The landlords are reportedly quoting USD 40 to 65 per sq m for these spaces, a threefold increase over the current rate.
Average Retail Rent by Location
Source: Colliers International Myanmar
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.
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