Property Predictions: What will happen to Myanmar rental prices in 2018?

0
1278
A view of downtown Yangon. (Leo Jackson)

“The year 2017 elicited mixed market opinions,” said Antony Picon, founder and director of Colliers International Myanmar. Yangon is in a nascent stage of property development, he explained, and fluctuation in rates is a commonplace occurrence.

“In fact, despite headwinds, we have seen continuous growth in the office market as rental levels become competitive.” Last year ended with “healthy” occupancy rates for the retail and serviced apartment sectors, he added, forecasting this trend to continue, especially for the industrial market. Though he stressed quicker reforms and further economic liberalisation will be “fundamental” for the real estate sector. Here are Colliers top 10 predictions for 2018:

  1. Retail recreational and entertainment features will become more prominent

The success of modern retail establishments will drive competitors to adopt more unique offerings. Besides the integration of entertainment features and family-oriented recreational activities, Colliers recommends mall owners to capture a wider consumer base through tenancy mix differentiation. One way is to integrate health and wellness tenants such as fitness centres, spas, outpatient clinics, and other medical services in their mall offerings.

2. Banks more confident with housing mortgages   

More condominium developers will secure bank partnerships this year.  Protective measures such as buyer’s legal security under the new condominium rules will in fact entice banks to expand their housing mortgage programs. Colliers suggests that banks should offer more reasonable mortgage terms which should also trickle down to lower-tier developments besides just high-end projects.

3. Industrial sector as a star performer

The increasing labour costs in competing countries such as China and Vietnam along with the lifting of US sanctions will prompt a return of the garment industry in Myanmar. Fast Moving Consumer Goods (FMCG) industry and logistics companies will take a fresh look at the country banking on its geographic and demographic potential. While we understand that infrastructure may remain inadequate in the near to medium term, we continually urge industrial developers to focus on improving land development as well as provisions for generators for redundancy purposes.  

4. The emergence of  smaller-scale serviced apartments and dedicated apartments for lease

With rents considered relatively reasonable along with basic but functional features, limited and lower-tier serviced apartments, despite smaller in scale will gain further traction. We are also likely to see growth in apartments dedicated purely for lease but perhaps will be found in peripheral addresses to justify the low rental offering. The limited supply in the medium term also provides a window of opportunity for many developers.

5. Downward correction on residential rental yields

We see residential rents to continually correct downwards driving capital rates to settle within the high single digit range from what used to be 18 – 22% in the past three to four years. The yields will however remain competitive regionally. We advise investors to be cautious with their selection process and aim for product and location that reflect high rental potential.  

6. Interest in Mandalay City will resurface

With the mixed-use development concept proven to be a success in Mandalay City, other developers are likely to jump on the bandwagon. Big-ticket projects may soon be revealed. Colliers advises developers to design satellite communities that offer an upgrade in terms of living quality. Products should be geared towards exclusive landed residences. This should be reinforced with a destination retail to create critical mass.

7. Competitive office rental environment to persist

More tenants will upgrade and relocation towards better office spaces will become more evident. We predict rents to remain competitive amid the decline in new supply this year. Further clarity in economic policies and quicker reforms will create an impetus for new market entrants as well as for business expansion. We advise landlords to keep lease terms favourable and to appropriate rental offerings in line with their building quality.   

8. Preference towards basic grade apartments and condominiums

Lower-tier but modern apartments and condominiums are likely to witness better sales performance. While construction delay for larger scale projects is problematic, buyers are likely to gain more confidence towards basic but modern developments, typically smaller in size and priced more reasonably. The full enactment of the condominium law may elicit demand this year but affordability will remain an issue.  We urge developers to be crucial with their site selection – ideally in alternative and accessible development sites in the immediate outskirts of Yangon. With these areas of appropriately priced land, devising offerings for mid-tier satellite communities ought to be a viable strategy. 

9. Hotel staycation packages gaining popularity

Modern upper-scale hotels will continually adopt creative solutions to help buoy occupancy. Besides relying from business and leisure foreign travelers, these hotels will start tapping the domestic market. Staycation packages would be an ideal strategy given Myanmar’s long list of holidays.  It is important that these hotels highlight features that enhances experiential value. This may come in form of unique amenities and facilities creating an overall destination itself.   

10. More developers eye south of Myanmar for resort destinations

More developers will head to Mergui/Myeik islands and explore commercial possibilities for resort and leisure developments. With more than 800 undeveloped pristine islands, the region is in fact a strong draw for luxury travelers. Infrastructure may initially be a challenge, and generators although costly will be necessary. Kawthaung will similarly be an attractive jump off point with hotels offering excursion trips to the nearby islands.    

LEAVE A REPLY

Please enter your comment!
Please enter your name here