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Research & Forecast Report

Yangon | Retail Market 2Q 2014

Top-tier retail projects – market’s new game changersLarge-scale and better quality retail developments are soon to take shape in Yangon as the city transforms itself in to a modern day metropolis. Veering away from traditional retail formats, retail players are now geared to introducing contemporary concepts and efficient designs to attract and cater to the city’s growing consumer-base. While many of the upcoming projects remain small in scale, some developers are now keen in delivering regional-sized shopping centers similar to many advanced cities in the ASEAN region.

Meanwhile, with high pre-commitment rates and the entry of global F&B’s, landlords are most likely to engage in higher rental rates going forward. As of the 2Q 2014, the city-wide average rental rates increased to USD 22 per sq m monthly, a significant growth of 8% from the previous quarter. However, with strong indications of foreign demand coupled with the completion of modern retail facilities, some landlords are confident with rents to range between USD 50 to 70 per sq m monthly in the medium term.

Forecast Direction

2Q 2014 – 2Q 2015

New Supply

Occupancy

Rent

2 Research & Forecast Report | 2Q 2014 | Yangon | Retail Market

Future developments promote modern urban lifestyle concepts The advent of large-scale and upgraded shopping centres will bring further growth in Yangon’s evolving retail market. Similarly, as the city transforms in to a modern day metropolis, consumer lifestyle subsequently advances, resulting in improved buying patterns.

At present, the shopping centres in the city remain locally-driven with very limited presence of international brands. Catering mostly to the nearby communities, foot traffic remains high in many of these older shopping malls. And, despite being outdated and poorly maintained, landlords continue to benefit from frequent shoppers who prefer accessibility and convenience owed to poor traffic conditions and transportation restrictions. However, new and contemporary retail centres are set to become game changers in the industry. Planned with better designs, innovative concepts, efficient layout, and improved tenancy mix, these new developments will force traditional retail players to rethink their strategies - refurbish, renovate and update existing facilities to compete with these emerging trends.

Future developments will create modern urban lifestyle concepts, consisting of community and shopping malls as vital components of upcoming mixed-use projects. Future developments namely HAGL Myanmar Centre, Golden City, Junction City, Time City and Dagon City 1 are to be key players of the industry potentially bringing in foreign retail tenants. Meanwhile, retail-support components are also concurrently being constructed as part of dedicated residential and commercial office projects - equally designed with better standard amenities and qualities.

In fact, in the second quarter of the year, local developers have initiated the introduction of new and updated retail centres in an aim to create shopping destinations. Equipped with new concepts and improved tenancy mix but small in scale, Ocean Super Center (City Mart Holdings Co. Ltd.,) in the urbanized Tamwe Township, caters mainly to the immediate surrounding catchment areas. On the other hand, the newly opened Myanmar Culture Valley (Nature World Co.), attracts an extensive range of customers. Strategically located near the tourist destination, Shwedagon Pagoda, and the frequently visited People’s Park, the mall is designed to raise the shopping experience in Yangon coupled with a wider variety of contemporary dining and retail options.

Backed by a growing consumer market and a booming tourism industry, both local developers and foreign investors are eagerly driven to deliver new retail facilities going forward. In particular, the city’s leasable retail floor space is projected to double in the next four years from the current 150,000 sq m. Although the majority of the planned retail centres are community-sized, three new planned large-scale shopping malls with over 50,000 sq m of gross floor area will highly likely be introduced, on a par in size with the existing retail centres in many developed countries in the ASEAN region.

Yangon Retail Stock

Source: Colliers International Myanmar

3 Research & Forecast Report | 2Q 2014 | Yangon | Retail Market

High pre-commitment rates indicates strong demand City-wide average occupancy rate narrowed by 3.5% in the first three months of the year caused by the introduction of new supply and the modest take-up rates witnessed in certain supporting retail establishments. As projected, occupancy began to improve in the second quarter to 96.5% (+1.4% QoQ) as demand quickly picked up. Along with the high pre-commitment rates of upcoming retail components, such as that in Union Financial Centre, and Riverview Point Yangon, the rate is expected to rebound to almost fully-occupied levels in the next six months, as in 2011 and 2012.

Downtown Yangon continues to have the highest occupancy rate with no vacancies over the last two quarters. The occupancy rate in the Inner City improved by a percentage point on a quarterly basis following the improved retail space absorption in SOHO Diamond and Pearl Condominium. In addition to the increase, is the strong pre-commitment rates in Ocean Super Center in Tamwe Township. Meanwhile, the occupancy rate in the Outer City area improved by 1.8% QoQ to 94.5%. Majority of the retail formats in the area long been fully-occupied with the exception of the recently introduced AKK Shopping Mall. This mall establishment opened with a low occupancy in the first quarter of the year albeit currently improving at a modest pace.

Source: Colliers International Myanmar

City-wide Average Retail Occupancy Ratea

a Revised & Rebased

The entry of global F&B’s boosts landlords’ confidence The introduction of new retail centres and with heightened interest of foreign demand drove the average rental rates to significantly increase in 2Q 2014. While majority of the tenants are local, demand particularly from foreign F&B’s is springing, driving landlords to dictate higher rates.

Global fast-food chains such as Malaysia’s Marrybrown, and Korea-based Lotteria and Café BBQ, are some of the first market entrants to have initially ventured in Yangon; and are now rolling out expansion plans. Meanwhile, MK Group in partnership with RMA Asia, have also recently stepped in and introduced the popular American ice cream parlor, Swensen’s, and the Italian-inspired restaurant The Pizza Company through a franchise license. Moreover, the recently opened Myanmar Culture Valley Center also exhibits many international-based restaurants, particularly Japanese. Soon after, many more recognizable brands are expected to follow suit, which will only create upward pressures on rent moving forward.

In the 2Q 2014, the city-wide average rent soared by 8% QoQ to end at USD 23.06 per sq m monthly. Downtown Yangon recorded the highest increase in rents by a significant 33% QoQ, to average at USD 33.5 per sq m. Similarly, an 11% growth in rent occurred in the Outer City area to breach over USD 20 per sq m – mainly driven by the introduction of Ocean Super Center Tamwe. The average rent in the Inner City is stable at USD 22.90 per sq m but is seen to trend strongly upwards with new projects to come online. As bigger and modern retail facilities are to be delivered in the medium term, landlords are keen in bringing in international brands, confident with rents to range between USD 50 to 70 per sq m monthly.

City-wide Average Rental Rateb

Source: Colliers International Myanmar b Revised & Rebased

Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 099karlo.pobre@colliers.com

Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 22theint.thwin@colliers.com

Tony PiconManaging Director | Myanmar+95 (0) 942 103 4026antony.picon@colliers.com

Copyright © 2014 Colliers International.

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.

Colliers International Myanmar Unit 7/C (6th Floor) White Cloud Building, No. (138/142) Thein Phyu Road, Botahtaung Township Yangon Myanmar TEL +95 (0) 931 491 678

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