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Colliers Property Report – Retail Q1 2019

GROWING MOVIE GOERS: A STIMULI TO RETAILTAINMENT

Summary & Recommendations

As of Q1 2019, the citywideaverage occupancy rate remained at 90% with major shopping malls maintaining almost full occupancy rates. Meanwhile, Colliers anticipates 2019 to have an additional supply of more than 10,000 sq meters. This should continue to encourage tenants’ flight to quality as well as further store expansions going forward.

Colliers urges both developers and operators to channel their investments by integrating more leisure and entertainment-led spaces and activities, not least, the cinemas supplementing the overall shopping experience. This, being a key driver along with other recreational options should provide variety, enticing especially towards the market’s strong young population.

Demand

Demand for retail space remains robust with the expansion of foreign F&B brands and entertainment options especially new cinemas. We forecast high occupancy in new retail establishments moving forward.

Supply

There was a 10% qoq growth in supply due to the completion of Fortune Plaza shopping mall in East Yangon. We expect 2019 to witness a modest increase in total supply.

Occupancy

Occupancy levels remain healthy for majority of the new establishments which averaged 90%. We forecast a momentary decline as a result of flight to quality shopping malls.

Rent

Colliers expects rental rates to trail a modest upward course in 2019 and onward coupled with the improving spending capacity of consumers.

STOCK TO WITNESS A MODEST INCREASE IN 2019

As of Q1 2019, Yangon’s total retail stock grew by 11% qoq and 16% yoy. This rise in supply was solely prompted by the completion of Phase 1 of Fortune Plaza in Thaketa Township by Excellent Fortune Development Group. The plaza is the first mixed-use development of its kind in East Yangon that blends retail spaces, offices and apartments. The first phase covering 16 acres of land includes low-rise apartments and a shopping complex, the latter contributing an additional leasable space of more than 35,000 qu meters (400,000 sq feet). At present, the township’s retail space is limited with only 40,000 sq meters, and the population density being one of the highest in Yangon. As such, infrastructure improvements such as the eventual completion of six new bridges linking Thaketa township should unlock promising commercial demand in the general area. Overall, Colliers encourages developers to construct peripheral but accessible new commercial destinatios to decentralise the already congested city centre. Building shopping malls is in fact key to build critical mass.

Meanwhile, we have revised our forecast and Yangon is projected to witness an additional supply of more than 10,000 sq meters (107,000 sq feet), likely to be witnessed in late 2019. However, sluggish construction activity could mean further development delays. Some notable projects planned to complete this year include Yadanar Mall (Time City) by Crown Advenced Construction Co.,Ltd., and The One Shopping Mall by Creation (Myanmar) Group of Co.,Ltd.

Other sizeable projects in the succeeding years such as the second segment of the Central Boulevard (Phase 1) by Marga Landmark, Inno City by Inno Co.,Ltd., Yoma Central by YOMA Land and The Garden by Kajima Corporation are all slated to debut in the next three to four years. Despite these large scale shopping malls, the overall retail supply remain limited in Yangon. We advise developers to take advantage of this opportunity and have a competitively timely inauguration of their new retail spaces. On the back of strong commercial development coupled with the availability of developable land, the Inner City Zone will continue to represent more than half of the total existing stock, and dominate even more strongly going forward. Colliers urges developers and operators to future streamline their new retail establishments by gearing future offerings towards the sizeable young population, whose average age is 29, most likely seeking leisure entertainment.

BOX OFFICE HITS IN RETAIL

According to the Ministry of Information, 33 Myanmar movies were exhibited across all the cinemas in the country in 2017 with the total number of moviegoers estimated to be between 300,000 and 600,000, representing less than 1% of the total population. As at the end of 2018, these numbers have more than doubled and have grown to 83 movies as well as 1.3 million moviegoers on the back of strong demand for better quality Myanmar movies and improving film industry.

It was reported that Myanmar now has 126 digital cinemas with 20 more slated to be opened in the next three months. Among the cinemas in Yangon, only 11 of them are located inside or adjacent to the shopping mall and the rest are mostly traditional and standalone cinemas. Looking closely, out of the top 10 notable shopping malls, only four has movie theaters. This leaves a sizable opportunity vacuum for developers to integrate cinemas into their future projects. As we view it, this rising sector of leisure and entertainment is hoarded with untapped potential to become a major driving factor behind generating higher foot traffic.

According to Asian Development Bank (ADB) forecasts, Myanmar’s economy is set to expand 6.6 percent in 2019 with speedy growth and transformation on the back of new policies, trade liberalisation and technological advances. As a result, consumers with increasing spending capacity will be ready to try new products and services with better quality options. Given the anticipated rise in additional stock moving forward, new establishments will also be tested by fast changing consumer preference which will drive retail developers to be more innovative, creative and strategic with their offerings. As the growth of cinemas is still at its nascent stage, developers may want to integrate new technologies into their movie theatres to fully seize the first mover advantage. For example, JCGV, one of the biggest cinema chains in Myanmar, opened its first Premium Cinema with only 32 seats in Junction’s Square in which the theatre, unlike the conventional ones, has giant luxury seating, as well as food and drinks catered towards the end of the movie, allowing viewers to enjoy a luxurious movie viewing experience.

Likewise, developers can design a diverse destination that serves as the widest possible visitor catchment area by integrating modern and innovative movie theaters into retail establishments and intermixing a differentiated and distinctive structure under one roof. With more to try, see and experience, retailers can also benefit from greater foot fall. By creating a natural dynamism that extends well beyond the peak hours, developers can introduce a perfect retail-entertainment mix that can encourage people to gather together, linger longer, do shopping, enjoy a meal and catch a movie.

ROBUST RATES TO PERSIST MOVING FORWARD

Despite the recently observed flight to quality, the citywide occupancy rate remains healthy at 90% with an increase of 0.1% qoq and 2.7% yoy. Store expansions and entry of foreign F&B franchises will continually drive strong demand for modern retail spaces. In fact, Auntie Anne’s made it’s first debut in the country opening its first shop in Junction City. Meanwhile, Tom n Toms now has multiple branches including in Kantharyar Shopping Centre. This overall expected demand should be reinforced with the recent liberalisation on the retail industry.

Overall, retailers’ confidence remains upbeat and further introduction of high-quality projects to support premium rents is likely in the next twelve months. As older developments also embark refurbishments or redevelopments, along with adjusting rates to mitigate further , we expect to witness a modest decline of average rental rates, a trend that is highly likely to persist in the succeeding months. In Q1 2019, citywide rents stood at USD 30.7 psm per month, a decline of 2.2% qoq and 4% yoy.

As more international quality supply comes online, Colliers advises developers and operators to streamline their retail establishments by channeling more investment into leisure entertainment such as cinemas. Developers can also supplement the malls with other differentiated design and structural elements such as higher ceilings, water fountains, indoor pocket gardens, curtain wall layouts, clerestories to offer modern retail experience to the fullest. With the growing number of cinema goers and the introduction of innovative theatres across the country, we should expect a significant rise of footfall entering more into the malls with movie theatres and recreational spaces.

For more information, please contact:

KARLO POBRE
Deputy Managing Director| Myanmar
+95 (0) 979 573 3378
Karlo.pobre@colliers.com

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