My visit to Myanmar about a year ago, including inspection of raw land, office buildings, serviced apartments and hotels, reminded me of when I first started working with CBRE Thailand 25 years ago. The key difference is that I now have a thorough knowledge of the property market, whereas in 1988 I was still new to the industry.
It was interesting to explore the market, trying to understand the key locations in Yangon and with the information available, predict where the prime development locations would be and how Thai and other foreign developers might influence the market.
Being the region’s last true frontier market, Myanmar has seen an exorbitant rise in property prices and rents due to the lack of quality developments.
Offices, hotels and serviced apartments are the first three sectors that enjoy high demand in any emerging market as it serves inbound investors and corporations that are starting up.
It’s a shock to see all three sectors currently achieving rents way above prime Bangkok offices.
In the past 20 years, the Yangon office market had seen limited demand and therefore existing supply is currently limited. Yangon’s total estimated office supply is 35,000 square metres, comprising Grade B and C stock by regional standards. With high demand, existing office buildings are operating at full occupancy, with rents rising to US$85-$90 (Bt2,700-Bt2,850) per square metre, compared with $50 last year.
Hotels and serviced apartments are also enjoying full occupancy and high room rates. The Yangon market has seen land prices, office and residential rents consistently rising without a short-term remedy in sight.
With unmatched demand and supply, prices are expected to see further rises until there is adequate supply; however, this is still a long way off. While a few private developers that are already well established in Myanmar, such as Yoma and Traders, are responding to the supply shortage, it will take a significant lead time to secure sites, obtain permits and complete construction.
We don’t expect the situation to change in the next two or three years until new projects are ready for occupation.
I recently revisited Yangon and noticed dramatic changes since my last trip a year ago, particularly in the number of small-scale developments. We have to admit that while Myanmar has a lot of potential, it is market for high-risk and long-term strategic investors.
There is currently an active local market, with land plots changing hands at rising prices.
New foreign investors will find the market difficult and challenging, as there is no robust legal framework for foreigners to buy land, and property development cannot be undertaken without approval from the Myanmar Investment Commission.
The lack of a robust structure and clear legal framework, the ongoing political risk and America’s remaining sanctions on Myanmar are significant factors that continue to hold back the country. Myanmar is not an open or easy market, particularly for the cautious or conservative.
Investors in manufacturing, telecommunications or other non-property business ventures will work within the current property landscape.
With foreign investment poised to pour into the country, investors are facing various challenges in setting up an office, from securing office space to finding residential accommodation for its expatriate staff. Yet it is an exciting market with potential.
Thailand has significant advantages of being Myanmar’s longest active trading neighbour, as well as having the right mindset to understand a frontier market. On Myanmar’s part, there is still a lot to be done in terms of infrastructure and groundwork.
CBRE Thailand has been advising a number of clients entering the Myanmar market and is spearheading the firms’ expansion into the country. It is not easy but it is definitely an exciting market and one where I look forward to contributing to the sensible development of the real-estate industry.
To see the official property price list used by the Myanmar Inland Revenue department for assessing property tax see article to Yangon Land Price List
Source: The Nation Thailand
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