Office Market in Yangon 1Q, 2014

Research & Forecast Report
Yangon | Office Market
1Q 2014

Yangon prime office rents, highest in the region
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.

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

Record growth in new supply; to double this year
The 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.

Yangon office stock

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.

Regional stock

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.

Inbound foreign investment continues to fuel demand
As 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 fullyoccupied 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 1

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 Kong
The 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

In 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.

average office rental rate by location

For more information please contact:

Karlo Pobre
Research Manager
Research & Advisory
+95 (0) 931 336 099

Theint Theint Thwin
Research & Advisory
+95 (0) 950 267 22

Tony Picon
Managing Director | Myanmar
+95 (0) 942 103 4026

Colliers International
Unit 7/C (6th Floor)
White Cloud Building,
No. (138/142) Thein Phyu
Road, Botahtaung Township
Yangon Myanmar
TEL +95 (0) 931 491 678

Source: Colliers International Myanmar

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