Downward Correction in Yangon’s Office Market

YANGON, Myanmar - Oct. 1, 2015 - PRLog -- Yangon, September, 30, 2015 – A significant increase in supply of office stock in 2015 combined with a slowdown in demand has led to a decrease in both occupancy levels and rental rates according to the Colliers International Yangon Office Report for the first half of 2015.

2015 will see a doubling of office space with an expected increase of 140,000 square metres. This is mostly from the introduction of the HAGL Myanmar Centre slated to open in 2H 2015. Occupancy levels in IH 2015 have declined to around 79.5% from 89% at the end of 2014. Rental rates have also seen a decline from 70.5 USD per square metre in 4Q 2014 to 65.8 USD in Q2 2015.

According to Tony Picon, managing director of Colliers International in Myanmar many existing and potential tenants are holding back until after the election in November. “We are witnessing a ‘wait and see’ approach by many companies and this situation should resolve itself once the situation stabilizes after the general election. This is common in other countries during uncertainty and leads to pent up demand”, said Mr. Picon.

Karlo Pobre, research & advisory manager at Colliers pointed out that although there is a surge in supply in 2015 it must be seen relative to other South East Asian commercial centres. “Even with the increase in 2015, total office supply will still only represent less than 3.5% of Bangkok’s. There is a long way to go for the office market in Yangon” said Mr. Pobre. For 2016 the increase in supply will be at a less frenetic pace with around 80,000 sq. m expected with the main new addition being Sule Square Retail and Office Centre.

Colliers International remains bullish in the longer term for the office market given the anticipated economic reforms going forward. Mr. Picon highlighted that many sectors are still in their infancy given that current regulations prevent many companies from expanding. “The further liberalization of the finance sector will lead to a significant expansion of existing companies’ office space requirements and also new companies setting up in Myanmar for the first time plus we can also look forward to more multinationals setting up manufacturing facilities and thus needing office space” he claimed. Going forward the long-term trend upwards is still on course.  “This is in all likelihood a temporary blip from the trend of further increases in rental rates and occupancy until a more enduring correction in a number of years”, added Mr. Picon.