Colliers Myanmar Flexible Spaces: A New Offering On The Block

Summary & Recommendations

Globally, the number of companies opting flexible workspaces has been gradually growing annually and is predicted to reach an unprecedented level in the next three to five years. With four million new businesses being registered worldwide just in one year, flexible spaces are seeing increasing demand from both small-scale enterprises and multinational firms. However, unlike other cities in the region that have a fully-matured flexible working landscape, Yangon houses an embryonic niche offering. While Colliers encourages both landlords and developers to consider delivering formats that suit market needs, the demand for quality office building will remain pronounced in the coming years. Nonetheless, we can anticipate an improved awareness of flexible spaces as an alternative offering to spread more widely across the city going forward – not just amongst start-ups and freelancers, but with the large-sized firms as well.


A dearth of new office development was witnessed in Yangon over the past six months, resulting to an unmoved cumulative stock of approximately 387,900 sq meters (4.2 million sq feet) of leasable area (see Figure 1). Given that a number of office buildings are still under construction, Colliers’ forecast for the rest of the year has been revised. Initially scheduled last quarter, the debut of the remaining projects in the pipeline has been moved to Q3 2019. Hence, in the next three months, we can expect an addition of more than 54,560 sq meters (587,280 sq feet) of Grade A (Time City Office Towers by Crown Advanced Construction Co., Ltd.) and Grade B offices (Mindama Office Center by China Company Ltd., Maha Nawarat Office Tower by Maha Nawarat Myay Co., Ltd.) to be launched across the city.

Prompted by the delays in majority of office projects in Yangon, a limited entry of supply in the next six to twelve months is likely. Likewise, given the sizeable projects (e.g. Harbour Trade Tower and M Tower by Mottama Development Co., Ltd., and Y Complex Office Building by Y Complex Co., Ltd.) estimated to come online in H2 2020, it would be best if developers and landlords (especially of older projects) consider the said period as a fine- tuning phase for them to aptly position themselves amid the heightening competition. Apart from the usual recommendations such as building renovations, facility upgrades, and rental adjustments, Colliers encourages these key players to ponder on delivering new formats and offerings in the market. Specifically, they may want to consider converting some of their spaces and adopt a flexible working concept.

The concept of co-working in Yangon first sprung in tea shops, cafes, and pubs seven years ago. These offered its users basic services such as desks, stationary, and plug points. This was followed by small time players entering the flexi-office business with limited set-ups , offering a work atmosphere conducive for freelancers and start-ups. Markedly, the number of flexible spaces in the city has thrived since the first had set up years back. At present, the aggregate stock totaled to nearly a thousand workstations (e.g. meeting rooms, flexible desks, etc.), representing some 18 business centers – catering to both local and foreign business entities initially establishing a presence in the city.

As the concept gained relative prominence, select few business centres have started adopting the term “co-working “ and have used it as a collective brand to represent various forms of flexible offerings (e.g. managed spaces, serviced offices, dedicated desks, memberships, virtual offices, etc.). Moreover, a number of operators see them as products that share the same demand drivers. In relation, there are multiple features that led to the birth of this concept. To fully understand this relatively new offering, Colliers listed few demand drivers that both developers and landlords must consider:

• Flexibility – Unlike traditional office setups that require tenants to lease a minimum lock-in period (usually varying between one to three years) on top of a security deposit, co-working spaces came without any such commitments. One could take space for a year, a month or even for few hours without the need to secure an initial deposit.

• Cost – Flexible space appears to be more cost-effective than that of standard offices. Tenants have the ability to share the costs (e.g. utilities, Wi-Fi, and office equipment, membership plans, etc.) involved in using the space. Colliers initial estimations show that a workstation in a typical flexible space in the city could be up to 50% cheaper than a workstation in a conventionally leased office.

• Space & Location – One of the challenges being confronted by new market entrants is searching for an optimally sized office space at preferred locations. At times, the space is either too large or too small with respect to the desired specifications. With flexible workspaces, businesses can occupy as many desks as they need without compromising the requirements. Moreover, desks could be added or removed, that too whenever and wherever needed. Likewise, some co- working operators also offer its client the choice of working at any of its branches, upon request.

• Growth of start-ups and SMEs – As declared by Vice President Henry Van Thio, SMEs’ growth in terms of volume has been evident over the recent years. In fact, the latest data from the Central Statistics Organisation revealed that 98% of more than 125,000 businesses registered in Myanmar are considered SMEs. Moreover, out of the 21.9 million workers, 85% are considered working in unregistered SMEs. Meanwhile, in an independent statistical count lead by an online platform named ChateSat, there are approximately 2,000 freelancers in the country, encompassing various industries and businesses. With the continuous reforms and programs from the government, Colliers believes that the growth of these enterprises will play a critical role in fuelling the demand for co-working spaces.

• Convenience – Such product offers plug-and-play minimalism and convenience. The ability to move in and out of an office space at short notice, and avoid complicated contract negotiations, fit out work, and dealings with brokers, landlords, and property managers, is seen as an attractive proposition , particularly for companies that are smaller in scale.

• Collaboration – More enterprises are veering towards shared workspaces. This initiative is aimed at fostering innovation through exposure to new business concepts and exchange of ideas. This very ideal has, in fact, been adopted by larger companies such as Ooredoo, Havas Riverorchid Myanmar, and Ananda. They have incorporated features and layouts of flexible space into their existing offices to make the work environment more comfortable, stimulating, and engaging.

Overall, flexible workspaces are fairly new formats within the market. However, this concept, by its nascent nature, is determined to remain a niche activity in the city. The dominance of traditional office space will remain pronounced and will not be challenged. Given its current rate of development, flexible spaces may not have significant impact on the major landlords. Though, key players should not neglect this product as its budding status points to ways of thinking and doing business that will impact their operations in the long run.

For investors eyeing on venturing into this untapped sub-sector, below are some of the strategic opportunities that can be applied in both existing and future projects:

• Sub-Lease – This is a model used by several co-working companies in the region. In this scheme, the co-working operator signs a long-term lease with the owner and then sub-leases the spaces to various tenants. A case study between Our Dream Co-working Space and HAGL Myanmar Office Tower could be an example for this scheme. The Hong Kong-based company managed to negotiate a leasing agreement with HAGL Leasing Team, giving them the permission to operate within the building. This exact model could be a sustainable route for investors. Instead of negotiating rental discounts with each tenants, the landlords can lease the spaces to co-working operators who are acknowledged to bring added credibility to the buildings. The owner earns direct rent from the operator and has no share in the profit. Operators who have gone with this model experienced limited intrusion from the owner and/or developer entity. In this case, it provides smoother working and more freedom to operate.

• Profit-Sharing Structure – Small time operators, who are not capable of investing massive capital upfront, opt for a revenue-sharing scheme. In this structure, the owner and the operator sign a joint venture agreement. The former takes the highest load of preliminary investments for fit outs while the latter takes up the obligation of supervising the operations. In this case, the owner and the operator work as business partners. Though, it absolutely rest upon the agreed terms and conditions of the contract, it is usually the owner who gets the bigger share of the profit earned as the initial capital is invested by him. Essentially, here are the fundamental facets of this model: (i) both parties benefit in case the business flourishes; (ii) both parties share the burden in case of a loss.

• Owner-Operator System – For this specific model, the owner converts the property into any flexible offering of his choice and operates it on his own. However, in Yangon, this model remains unusual as most property owners either lack the expertise to operate a co-working space or are too big to get into such structure. Keppel Land and Shwe Taung Group’s development plan could be an example for this business model. In Q2 2018, KLOUD Office was introduced to the market. Integrated within the Junction City Office Tower, this in-house project offers a hybrid of serviced office and a co-working space. Colliers encourages developers and landlords to adopt such model. Doing so can add value to the development, and maintain or even extend their relationships with tenants by offering a diverse portfolio of core and flex space to meet their changing needs.

Rather than viewing the burgeoning of flexible spaces as a threat or an insignificant trend, they may consider taking the lead from landlords in the regional markets and incorporate some of the key features of flexible working spaces into their respective development plans. We can expect a raised awareness of flexible spaces as an alternative workplace concept to spread more widely across the city in the coming years. In the short term, we see more start-ups and freelancers to station themselves within flexible workspace. Similar to Colliers Asia’s prediction within the region, in the medium to long term, we expect larger, mid-office teams to start moving to flexible workspace in order to unlock flexibility between core space and flexible space, achieve cost savings, and create more collaborative work environments.

Generally, the demand for traditional office spaces will remain pronounced. In fact, despite the modest decline observed as of Q2 2019, the citywide occupancy remained above the 70% mark. Trailing the same path, the citywide average rental rate further corrected downwards at USD39.5 per sq meter per month.

Going forward, Colliers expects both occupancy and absorption levels to further improve once the government allows more foreign businesses to operate in the country. Given the recent developments regarding the easing of sanctions for foreign banks and foreign insurance providers , demand for quality office spaces is predicted to rise. Following our predictions from the previous quarter, it is likely that the main offices of most of these companies will remain focused on downtown. Foreign firms are most likely to choose Grade A or Grade B quality office space which will be for mostly operations. Likewise, Colliers expects the market to experience a more competitive rental environment in the next three years. This should create a drive for potentially large-sized businesses to scale up operations, as well as small and medium sized tenants to relocate in formal office buildings.

Primary Author:

Paul Ryan Cuevas
Senior Analyst | Research | Myanmar
+95 0 9 960 381 584
[email protected]


Ye Tun Htet Paing
Senior Researcher | Research | Myanmar
+95 0 9 505 9431
[email protected]

Source: Collier


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