Serviced Apartment Market in Yangon 3Q, 2014



Research & Forecast Report
Yangon | Serviced Apartment Market
3Q 2014

Chronic future undersupply as expats swell
As at the end of 3Q 2014, the total supply stock of serviced apartments in Yangon improved by 2% quarter-on-quarter following the completion of The Residence@26 with some 24 units. Going forward, the supply pipeline is weak seeing only an annual addition of 200 units in average from 2015 to 2019.

With the growing number of corporate housing requirements driven by the continuous entry of foreign businesses, the future supply is expected to be insufficient. The current all-time high occupancy rates mean that the limited supply situation will become more pronounced in the near to medium term.

Meanwhile, owing to strong take-up rates, the average rental rate is on an upward trend. However, the introduction of modern and better-grade serviced apartment in the medium term could potentially drive rents in inferior quality developments downwards.
forecast Direction
Insufficient international standard services and facilities
In 3Q 2014, the serviced apartment supply stock in Yangon grew by 2% QoQ following the opening of The Residence@26 in Sanchaung Township. The total stock improved by 58% compared to 3Q 2013’s 642 units – an increase mostly driven by the introduction of Shangri-La Residences and SOHO Diamond, collectively at 348 units. Going forward, the development pipeline appears underwhelming despite the heightening demand. From 2015 to 2019, the market is estimated to yield an annual average of 200 new serviced apartment units, a less robust supply figure as opposed to the forecasted significant growth in the other property segments. Moreover, the existing facilities in most serviced apartments are generally below international standards, but adequate for most expatriates.

The Residence@26 represents the only additional supply this year, and the latest since the introduction of Shangri-La Residences and SOHO Diamond in the fourth quarter of 2013. The recently opened serviced apartment, consisting of 24 units, is designed to suit expatriate requirements with unit sizes offered at 34 sq m, 60 sq m, and 85 to 115 sq m, for a studio, one-bedroom, and twobedroom unit, respectively.

The studio and one-bedroom units tend to be most preferred in Yangon on the back of the continuous rise of inbound single expatriates. This similarly applies to most executives who prefer to come independently as Yangon’s infrastructure (e.g. medical facilities and educational institutions) fall short in quality to serve foreign families’ necessities.

Behind the Residence@26 development is a multi-sector business company, Myanmar Seilone, engaged with a wide ranging portfolios including real estate – construction and management of high-end luxury condominiums, a hotel, and recently a serviced apartment.

International standard facilities and services in most serviced apartments in Yangon remain insufficient. Since the majority of these projects were built over a decade earlier, many of their facilities are outdated and have turned old fashioned, being mostly run by local service operators. This however is about to change as the number of foreign operators become more evident in the medium term. The entry of other international brands such as Accor, Lotte, Somerset and Wyndham suggests that future projects are to be equipped with upgraded services and modern facilities in parallel standard to those in much more advanced cities in the region.
Yangon Service Apartment Stock
The Residence@26 represents the only additional supply this year, and the latest since the introduction of Shangri-La Residences and SOHO Diamond in the fourth quarter of 2013. The recently opened serviced apartment, consisting of 24 units, is designed to suit expatriate requirements with unit sizes offered at 34 sq m, 60 sq m, and 85 to 115 sq m, for a studio, one-bedroom, and twobedroom unit, respectively.

The studio and one-bedroom units tend to be most preferred in Yangon on the back of the continuous rise of inbound single expatriates. This similarly applies to most executives who prefer to come independently as Yangon’s infrastructure (e.g. medical facilities and educational institutions) fall short in quality to serve foreign families’ necessities.

While the investment outlook for serviced apartments is highly optimistic amid expectations on the upsurge in expatriate demand, the supply pipeline however is less dynamic and the market remains relatively untapped. As at the end of 3Q 2014, Yangon’s total supply stock was at 1,014 units. The number is projected to expand by a meager 2% by the end of this year while only about over 1,000 units are expected to complete within the next five years. There were about nine new projects announced over the recent years but only less than half have officially started construction. Consequently, the completion dates of some of these developments may further slide for a year later than scheduled.

Some of the upcoming notable projects include Accor Sebel Yangon Myat Min in North Okkalapa Township, Daewoo Amara Service Apartments in Hlaing Township, Golden City Serviced Apartments in Yankin Township, Dagon City Serviced Apartments in Dagon Township, Somerset @ 68 Residence in Bahan Township; and the recently announced Sakura Residence 2 and Wyndham at Kantharyar Centre in Kamaryut and Bahan Townships, respectively.

Occupancy rates to quickly rebound to almost fully occupied levels
The city-wide average occupancy rate was stable in 3Q 2014 with slight movements recorded in take-up rates. The rate is almost unchanged on a quarterly basis, being at the sub-96% level. However, the overall occupancy rate was up by five percentage points compared to the same period last year and is strongly headed to reflect limited availability in the near term amid the strengthening corporate housing requirements.

The occupancy rate of serviced apartments in the Outer City zone remained at an all-time high, at almost fully-occupied levels over the last seven quarters. Meanwhile, the Inner City zone witnessed a slight uptick in take-up rate with some 705 units occupied, despite the additional 24 units introduced in the same quarter. With only about 23 units of serviced apartments scheduled to complete in the next six months, the direction on take-up rates is set to rebound to almost the same levels as was in 2011 and 2012.

Service Apartment Average Occupancy
Rental rates continue to increase year-on-year
Average Serviced Apartment Rental Rate by Unit Type
The average rental rate of most unit types in Yangon was fundamentally unchanged on a quarterly basis with the exception of the studio unit type which increased by 3% QoQ. On a yearly basis, the rental rates for four-bedroom units grew the most by 15% followed by one and three-bedroom units, both at 10%. The substantial increase in rental rates was mainly driven by the Shangri-La Residences, deemed the highest quality serviced apartment in Yangon at present.

The direction on the average rental rate is to continually move upwards as new supply is insufficient going forward. However, the new and better grade serviced apartments, set to be introduced in the medium term, will create downward pressure on rents especially in existing inferior quality developments, following the flight to quality by most tenants.

For more information please contact:

Karlo Pobre
Research Manager
Research & Advisory
+95 (0) 931 336 099
karlo.pobre@colliers.com

Theint Theint Thwin
Researcher
Research & Advisory
+95 (0) 950 267 22
theint.thwin@colliers.com

Tony Picon
Managing Director | Myanmar
+95 (0) 942 103 4026
antony.picon@colliers.com

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

Source: Colliers International Myanmar

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