Yangon’s real estate market to see growth

This follows a fairly quiet period last year as the market cooled in the run up to November’s elections and the torrent of foreign investment slowed, causing office rents to slide and residential sales to come to a halt.

Andrew Gulbrandson is head of research and consulting for JLL Thailand and is responsible for coordinating much of the firm’s ongoing consultancy work in Myanmar. He noted that 2016 could perhaps bring about stabilisation in the market as a whole.

And while a smooth power transfer will buoy demand, new project launches are expected to slow after sharp growth, he said.

"Though many challenges remain, we believe the outlook for this dynamic landscape in 2016 to be positive," he said.

"So far the formation of the new government has been smooth, easing concerns over the post-election political uncertainty. Ongoing ambiguity over the structure of the new government that has built up a legislative backlog affecting a number of regulations should be eliminated when the new government is formed."

He said many business activities that had been put on hold due to these concerns should resume and this should spark demand in Yangon’s real estate market.

"In addition, a more cautious approach that investors and developers have taken should lead to a decline in future development project launches, allowing the existing supply to be gradually absorbed," he said.

Over the past several years, Yangon has witnessed a flurry of real-estate activity following the loosening of military rule and a gradual process of liberalisation. Rents only declined last year.

According to JLL, after peaking near US$100 (Bt3,600) per square metre per month in mid-2013, grade A office rents have since tumbled by 35-40 per cent as new supply entered the market.

Occupancy, mostly in existing projects, also declined as most tenants sought less-expensive accommodation in newer non-prime buildings and other alternatives such as villas, hotels and retail centres. Some have left the market.

"Based on feedback from our clients in the country, many occupiers are still in the wait-and-see mode adopted before the election. As a result, it’s likely that the first half of 2016 will be relatively quiet before activity picks up in the second half when the new administration is in control," Gulbrandson said.

Foreign investors have played an important part in the early development of Yangon’s real estate markets with investment coming from all over Asia, JLL said.

That includes well-known developers based in Singapore, Korea, and Japan and to lesser-known but equally impactful investors from Thailand, Hong Kong, China, and Vietnam.

The market is also attracting investment from more global investors, including the International Finance Corporation, the private sector arm of the World Bank, JLL said.

"Based on recent discussions with clients, foreign interest across sectors in Myanmar is still very high. However, with numerous limitations in a number of sectors, but most pertinently banking, we may see lower levels of foreign investment in 2016 than in previous years," Gulbrandson said.