Retail Market in Yangon 1H, 2015

Research &
Forecast Report
Yangon | Retail Market
1H 2015

Global F&B chains flock to Yangon
The presence of international F&B chains, through franchise agreements, strengthened over the past year with Kentucky Fried Chicken opening as the first U.S. fast food chain brand in July.

The quality of shopping centres remain below international standards despite continuous attempt of refurbishment and improvements done by some retail players.

With the emergence of modern retail centres, foreign brands are likely to be attracted going forward. Better quality retail malls are expected to increase in the near to medium term.

The city-wide occupancy rate is projected to temporarily decline in the next six months while average rents will be skewed upwards following the completion of HAGL Myanmar Shopping Centre.

Forecast Direction RM

Renovations and refurbishments seen over the last six months

Yangon Retail Stock 1h, 2015

As at the end of 1H 2015, Yangon’s total retail stock stood at approximately 150,000 sq m of leasable space. While there had been no new supply delivered since the completion of Myanmar Culture Valley Centre in 2Q 2014, some existing retail malls are now undergoing improvements.

A temporary drop in supply occurred in 1Q 2015 as Sule Plaza (formerly called Myanmar Shopping Centre) underwent renovation. The establishment, located in Kyauktada Township, reopened as an upgraded facility in May – in an aim to heavily attract tenants. This similar process is expected to trend especially among poorly maintained and outdated shopping centres in Yangon.

Moreover, some local retail developers are now geared to compete with the emergence of modern retail facilities. In fact, Junction Centre Group which runs a chain of shopping malls in the city, completed refurbishment process in some select establishments including Junction Maw Tin and Junction Square.

With relatively better designs and new concepts, both malls experienced an increase in foot traffic over the last few months.

Franchising drives the entry of International F&B chains

In general, the majority of the existing developments in the city still remain below international standards. Besides the inefficient layout and the lack of attractions, the tenant mix is limited given that foreign businesses are not allowed to trade in the country.

However, franchise agreements over the past two years have risen giving way for international F&B chains to set up in Yangon. One of the most recent include Kentucky Fried Chicken (KFC) which opened on Bogyoke Aung San Road in Downtown. Being the first U.S. fast food chain to set up in Myanmar, KFC’s presence suggests a rise in interest among other international chains in the future. Prior to KFC, Tony Roma’s, an American casual dining restaurant, opened in January.

Two more international F&B chains are slated to open for the remainder of the year. Pastamania, a popular casual restaurant in Singapore, will have its pioneer branch built on Inya Road in Kamaryut Township. The standalone establishment is now nearing completion, and will be ready in September. Pastamania is also present in Malaysia, India and in the Middle East.

Moreover, Yum! Brands in partnership with Jardine Restaurant Group and local retailer City Mart Holding, is set to introduce Pizza Hut in November. The restaurant is to be located on Dhammazedi Road beside Marketplace supermarket.

Besides international F&B chains, other foreign brands will likely follow suit. With franchising being a successful investment structure in the greater region, local businessmen in Myanmar are seen to build stronger ties among foreign retail investors going forward.

However, the quality of retail developments in Yangon remains inadequate in order to meet international standard requirements, driving some of the recent foreign F&B chains to set up in standalone establishments.

This will be about to change as new and modern retail facilities are slated to complete in the near to medium term, such as HAGL Shopping Centre (2H 2015) and Sule Square (1H 2016). In the next four years, over 125,000 sq m of leasable space is expected to be completed. While some of these developments are still considered average grade, there is however a growing number of future shopping centres that are potentially of high quality standards.

The international F&B chains will be one of the key demand drivers for retail developments going forward, likely to be followed by mid-tier foreign brands. The demand for luxury products will remain relatively low in Yangon, as most affluent locals prefer neighbouring shopping destinations, Bangkok and Singapore.

Occupancy rates temporarily down, rental rates to increase in the near Future

The refurbishment process that has occurred in some shopping malls have led to a temporary drop in the average occupancy rate over the last three quarters. The city-wide rate was slightly down by close to 1% in 2Q 2015 versus 1Q 2015. However, on annual basis, the rate remained generally stable at 95%. Overall, the demand for retail centres in Yangon remains strong with vacancies hovering between 3 to 5% over the last few years. A temporary decline in occupancy is projected in 2H 2015 following the completion of HAGL Myanmar Centre. The shopping mall, consisting of 38,000 sq m of leasable space, will be the largest retail facility in Yangon thus far.

city wide average retail occupancy rate 1h, 2015

city wide average retail rental rate

Meanwhile, the city-wide average rental rate has remained generally stable since 4Q 2014 at USD 25 per sq m per month. On an annual basis, the rate is up by USD 2.57. Downtown Yangon has registered the highest rental rate driven from the supporting retail centres in notable office developments. The overall rate will be skewed upwards once HAGL Myanmar shopping centre is completed.

For more information please contact:
Karlo Pobre
Research Manager
Research & Advisory
+95 (0) 931 336 099

Adrian Soe Myint
Analyst Research & Advisory
+95 (9) 976 895 535

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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