Colliers International Yangon Myanmar Serviced Apartment Market Report 1Q 2014

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Research & Forecast Report

Yangon | Serviced Apartment Market 1Q 2014

Weak supply pipeline makes the shortage of service apartments more pronounced Expatriate accommodation requirements continue to gear up amid scant supply of service residences in Yangon. Since Myanmar started the process of opening up to the global economy in 2010, the number of expatriates have been growing substantially in line with the initiating of various sectors to foreign investment, such as the oil & gas and telecom industries.

As at end of 1Q 2014, the total room stock in the city was at 990 units. The supply pipeline remains weak with only over 270 new rooms to be delivered in the next two years. Over-all occupancy rates are estimated to remain at an all-time high level in the medium term driving the landlords to raise rental rates going forward. The number of in-demand one bedroom units is especially small given the demand from expat individuals and couples.

Forecast Direction

1Q 2014 – 1Q 2015

New Supply

Occupancy

Rent

2 Research & Forecast Report | 1Q 2014 | Yangon | Serviced Apartment Market

Over 200 new rooms within the next two years - inadequateYangon is beginning to experience shortages in serviced apartments as expatriate accommodation requirements heighten alongside the liberalization of Myanmar’s economy. Since 2002, the total number of room stock remained unchanged until the introduction of Shangri-La Residences (240 rooms) and SOHO Diamond (108 rooms) in the latter part of 2013 and despite the closure of Grand Mee Ya Ta for demolition. Despite the recent increase, the supply remains limited in the long term amid high demand. Even on a regional level, the inadequate stock in Yangon is more pronounced as it remains meager to neighboring city, Bangkok, with over 18,200 serviced residences units. This excludes the high-quality leasable apartments and condominium units in the latter which are almost non-existent in Yangon.

Some developers are now ramping up projects geared to accommodate the anticipated surge in demand. However, this remains limited. At present, there are roughly nine new serviced apartment projects in the pipeline, translating to over 700 units, scheduled to be completed in the span of five years. One of the projects expected to be delivered this year is Four Rivers Kokkine Residences by Green Vision Construction Co., Ltd. & Four Rivers with some 23 rooms. Other notable projects in the pipeline include, The Sebel Yangon Myat Min, Daewoo Amara Serviced Residences, HAGL Myanmar Centre Serviced Residences, Golden City Service Apartments, Somerset @ 68 Residences, and Kantharyar Serviced Apartments.

SOHO Diamond: seventy units swiftly filled-up in just one quarterFrom its all-time high of 99%, the city-wide average occupancy rate for serviced apartments artificially dropped by over ten percentage points in late-2013 due to the delivery of sizeable supply of 348 rooms (SOHO Diamond and Shangri-La Serviced Residences), the highest growth in additional stock recorded on a quarterly basis. Despite the substantial upturn, the rate of absorption was abrupt. In 1Q 2014, the average occupancy rate quickly rebounded, as projected, by almost four percentage points to 92.42% QoQ and is geared to trend strongly upwards as expatriate accommodation requirements continually build up.

Source: Colliers International Myanmar

Yangon Serviced Apartment Room-Stock


Yangon Vs. Bangkok Services Residences Supply Stock

3 Research & Forecast Report | 1Q 2014 | Yangon | Serviced Apartment Market

All-time high occupancy rates drive landlords to continually raise rents

Demand for serviced apartments has been highly evident over the last nine months resulting from corporate requirements in various sectors such as telecoms. In SOHO Diamond alone, a sudden leap in occupancy occurred in the first quarter when the remaining 70 units were swiftly filled-up mainly by expatriates working in the telecom sector. Meanwhile, fully occupied levels have long been recorded in Micasa, Marina, Espace Avenir, and Golden Hill towers, where a waiting list program in some of these residences is now in place. In 2013, the Myanmar Investment Commission approved over a 100 foreign businesses to operate in the country. The number grew by a significant 50% over the previous year. As a result, this will translate to an upsurge on housing requirements as these foreign companies potentially employ at least two to three expatriates in Yangon. With over 700 foreign businesses approved as of 1Q 2014, demand will outpace supply this year with a negligible 173 new rooms of serviced residences expected to be delivered.

The high occupancy levels across all serviced apartment in Yangon drove rental rates to increase in 1Q 2014. Being the most preferred unit type, the one-bedroom average rent grew to USD 4,550 monthly which registered the highest quarterly increase (+8%) among all other unit types. This is more than twice the rent for an equivalent serviced apartment in Bangkok.

Meanwhile, the lowest growth in rent was recorded in the three-bedroom type, averaged at USD 7,014 monthly (+2%). The rents in two and four bedroom units also grew by high single digits quarter-on-quarter but were mainly driven from the introduction of premium rates offered in Shangri-La Residences.

It is most likely that rental rates will further increase in the long term as the market remains undersupplied especially for smaller units and the pipeline is weak versus the projected demand.

Meanwhile, the lack of international standard residential condominiums and decent apartments for lease, together with limited availability of affordable landed properties are upward pressures to rent. Prices are likely to rise to approximately USD 6,000 for a one-bedroom unit in the next twelve months. However, further increases will drive expatriates to alternative options such as weekly commuting to Yangon from Bangkok or forgoing facilities and renting local condo units.

Average Serviced Apartment Occupancy


Average Serviced Apartment Rental Rate by Unit Type


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The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 [email protected]

Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 [email protected]

Tony PiconManaging Director | Myanmar+95 (0) 942 103 [email protected]

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Colliers International Yangon Myanmar Serviced Apartment Market Report 1Q 2014

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