Kantharyar is now Leasing - Call us on +95 (0) 1 9377212
Kantharyar is now Leasing - Call us on +95 (0) 1 9377212

MYANMAR'S OFFICE MARKET

The office real estate market in Yangon has seen an improvement following the passing of the Companies Law and the relaxation of the restrictions on retail and industrial foreign ownership. However, an over-supply of office stock in 2016 put rental rates under continual downward pressure over the following years. This resulted in high levels of relocation activity from tenants looking to take advantage of the lower rents. Many tenants “moved up” from poor quality residential properties into new-build office towers and apartment blocks at affordable rental rates.

More recently the over-supply situation has been somewhat rectified as the government has eased restriction on the insurance and banking sectors which has encouraged big space occupiers to enter the market and soak up a large amount of Grade A office supply in Yangon. This has seen Grade A office stock fall significantly in 2019 and has allowed rental rates to stabalise into 2020.

Supply grew exponentially in 2015 which lead to the large over supply in 2016 that was previously mentioned. It is clear that the more steady supply of office stock in the years since have allowed occupancy rates to catch up to their current rate of 77%.  The addition of Ycomplex and M Tower is due add 51,355 sqm of office space to the Yangon real estate market in 2020, however, delays due to COVID-19 disruptions could see part of this come online in 2021 instead. Supply is due to increase significantly once again in 2022 with the addition of Yoma Central. Without further liberalisation of business sector in Myanmar, this new supply will likely put pressure on occupancy rates and therefore rental rates.

Rental rates have fallen significantly from the heights of 2014/15. Between 2018 and 2019, average prime rental rates fell from US$ 35 to US$ 30 and SPS initially expected rents to bounce back to US$ 35 in 2020. This was due to the fact that large spaces in Grade A developments had increasingly been drying up. However, the impact of COVID-19, compiled with 2020 being an election year and seeing a significant increase in Grade A stock, will likely now see rental rates plateau at US$ 30 in 2020 and 2021. Although there is the possibility that rental rates will increase to US$ 35 once again in 2021, it is likely this will be short lived as the introduction of Yoma Central and roughly 80,000 sqm of prime office stock will apply further downward pressure on rental rates.

We now enter the next supply cycle with many new large-scale projects due for completion from 2021 onwards which will put downward pressure on rents unless there is a surge in demand from new government legislation, easing of restrictions and improving the ease of doing business in Myanmar further encouraging FDI.