Urban Landscape: Yangon — A Missed Investment Opportunity?

WE were fortunate to be among the first real estate consultants to do business in Myanmar. Since 2012, we have seen a rapid transformation of the urban landscape in Yangon. During a recent trip to conclude a consultancy work for a Japanese client, we are glad to see some of our earlier consulting work completed or near completion and also played a part in bringing the positive changes to the city.


A marked weakness in rent for the office is apparent as new, large buildings are completed. As at first quarter of this year, the average asking office rent in Yangon was between US$45 (RM193) and US$65 per square metre (sqm) per month. This is significantly lower than its peak in second quarter of 2013 when the asking rent was as high as US$90 per sqm per month.

The overall office market occupancy fell by 16 percentage points quarter-on-quarter to 51 per cent in the first quarter. This is mainly due to the completion of one of the first truly Grade A office building at Junction City and Sule Square, which have increased the total office stock by 48 per cent.

These are just the tip of the iceberg as many large-scale office spaces remain under construction and are likely to be completed over the next two to three years. We expect tenants to flight to quality spaces as more buildings are being completed. The office rent and occupancy in Yangon is expected to be under pressure in the next years. (Chart Figure 1: Yangon Office Rental Index (Source: REMS Research)

The residential sector is under even greater pressure. The expected flood of foreign demand has not materialised. The proposed laws regulation strata-title and foreign ownership have lacked the clarity, which are needed for foreign investments to happen. The growth in income among the local has not been fast enough to help them afford these sparkling new apartments. We are afraid that the demand of apartments are unable to catch up with the supply.

The serviced apartment sector remains among the bright sparks in the real estate market in Yangon. Demand has been surprisingly resilient. As at first quarter this year, the overall market occupancy rate was at 97.9 per cent. The top-tier serviced apartments like Golden Hill Tower, Mariana Residence and Shangri-la Serviced Apartment are operating with 100 per cent occupancy with long-waiting lists.

In terms of rental, despite the decline from its peak, serviced apartments in Yangon are still more expensive than other emerging markets and comparable to that in prime Singapore locality. The average asking rent of one-bedroom unit was about US$3,900 per month, two-bedroom at US$5,700, three-bedroom at US$6,800, four-bedroom at US$7,800 per month and studio at US$3,800 per month in the quarter. (Chart Figure 2: Yangon Serviced Apartment Rental Index (Source: REMS Research).Note: The index is calculated based on our survey basket which comprises of 979 units of good quality serviced apartments in five serviced apartments which have more than 100 units.


Despite all the missed and probably misplaced expectations, the economy remains as one of the fastest growing ones in Southeast Asia. Based on data from the International Monetary Fund, Myanmar’s economy grew at an average of 7.2 per cent per annum for the past three years and is forecast to grow at an average of 7.5 per cent for the next three years.

There are many potential catalysts that could provide a surprise for the market. The lack of a comprehensive planning framework that is backed by legislative power, the lack of clarity on individual foreign purchases and the lack of access to financing (though improving) are the biggest stumbling blocks for investors. An improvement to these could serve as a trigger point for a sharper growth in investments and thus, demand for real estate.


For investors, channels which open up investments into low-cost housing seems to offer the most opportunity as housing affordability remains an issue. The poor state of maintenance of existing housing and urbanisation will support demand. Logistics and warehousing appear to be a natural asset class to look at as manufacturing and maybe some parts of their agriculture sector starts to pick up pace.


Source: New Straits Times

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