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Colliers Property Report –Yangon serviced apartment supply Q1 2020

Summary & Recommendations

As more and more townships in Yangon go into lockdown as a result of COVID-19, the serviced apartment sector is expected to experience a long stall in demand and possible decline in occupancy given recent repatriation of many expatriates. This downward pressure will be further exacerbated by a significant increase in supply expected to come online in the later half of 2020. This increase in upscale supply, coupled by the looming economic recession is expected to plummet occupancy rates going forward.

Looking at it from a positive angle, COVID-19 signals a time sensitive opportunity to lock in competitive terms before the market fully recovers. Thus, during this time of crisis, Colliers encourages developers and serviced apartment operators to start exploring creative strategies that cater to the future of work such as providing facilities that complements work-from-home lifestyles.

CONSTRUCTION DELAYS EXPECTED

Although no new additions of serviced apartments were recorded in Q1 2020, the total supply stock is expected to reach a new high as the year progresses. The aggregate supply stock is expected to close with a total of more than 2,900 rooms by the end of 2020, about 27% increase from last year. Colliers anticipates construction delays in almost every project as COVID-19 halts construction as well as non-essential activities. Supply is expected to increase more than expected as large-scale condominium projects have decided to transform units to serviced apartments. This would add another 744 rooms by 2021, assuming the projects are completed on time. The continuation of this trend would be detrimental, adding significant downward pressure to price and occupancy rates in the next two years.

POWERING THROUGH A CRISIS

The citywide occupancy rate has remained above 75% in Q1 2020, however this is unlikely to sustain. Limited enquiries were observed, indicating that the rental activity during the reviewed quarter has remained relatively stationary. Demand is likely to decline with majority of expatriates, whom make up a the large majority of the tenant market, are repatriated back to their respective countries due to COVID-19 Following this migration, rental rates are also expected to correct downwards going forward. Lease rates have continuously declined, noticeably with studio apartments seeing a 12% QOQ drop in price and settling at about USD 1,600 per month. Colliers anticipates that demand is unlikely to pick up in the near term amid an economic recession following a global pandemic and expresses the need for developers and building operators to start offering flexible payment terms or rent reductions. Colliers strongly encourages building operators to further come up with creative strategies, such as providing free transportation to grocery stores, free cleaning and laundry services, in order to entice future tenants, but more importantly, to retain current ones. As the hiring of expats to Myanmar is likely to be a challenge in the near future, demand for serviced residences is expected to witness muted or meager growth. Thus, it is of utmost importance that building operators start to implement this strategies in order to stay resilient through the crisis. Making payment terms more flexible and adjusting prices to be more competitive are viable solutions to this approach.

Source : Colliers

For more information , please contact :

Thwe Thwe Soe Analyst | Research Myanmar

+95 0 9 965 126 124

thwethwe.soe@colliers.com

 

 

 

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