2019 PROPERTY MARKET PREDICTIONS
INSURANCE INDUSTRY TO BUOY LEASING DEMAND With years in the making, foreign insurance providers will finally be given the green light to conduct business in Myanmar. This recent development is set to boost demand for quality office spaces. One of the investment vehicles for insurers is property, especially office buildings, as they can invest in more illiquid assets. It is likely that the main offices of most of these companies will remain focused on Downtown as these remains to be Yangon s key business district. Foreign firms are most likely to choose Grade A or Grade B quality office space which will be for mostly managerial, underwriting and administration staff.
RETAIL-TAINMENT TO FLOURISH The shift in consumer preferences towards modern and experiential retail developments, on the back of the improving spending capacity of the population, will potentially drive both developers and operators to rethink their projects and start differentiating their offerings with more emphasis on experience and convenience. Streamlined offerings will likely be introduced going forward, along with the lines of lifestyle-oriented hubs, regional shopping centres, and destination malls. Developers are advised to push for a well-curated tenancy mix. Adding more distinctive tenants (e.g. food halls, amusement parks, movie theaters, arcades, bowling alleys, event gathering spaces, etc.) to shopping centers is a direct response within the industry to accommodate the changing shopping behaviors and new preferences.
THE RISE OF DIGITAL COMMERCE The emerging e-commerce sector will play a crucial role to driving the country s retail industry in the coming years. In fact, one of the biggest contributors to the country s internet economy is retail e-commerce. The improvement in internet infrastructures and proliferation of digital mediums will strongly expand its influence to businesses, especially small to medium-scale enterprises. While the role of malls and physical stores will remain crucial, the number of buyers resorting to online purchases is predicted to exponentially grow in 2019 onwards given that mobile penetration rate is nearing to 100% with smartphone penetration above 85%.
PREFERENCE FOR MID-TIER SERVICED APARTMENTS TO PERSIST Companies are expected to remain vigilant on managing operational costs, which will continue to put downward pressure on housing budgets of expatriates in Myanmar. With global mobility remaining a key strategic initiative with MNCs, demand for short-term housing is expected to grow. The changing business climate in the country will continue to lead to tenants trading down to the mid-range of the market. These secular trends will steer demand towards smaller suites typically found in standard and boutique serviced apartment schemes.
RECORD BREAKING TOURIST ARRIVAL NUMBERS FROM ASIA Foreign arrivals will continue to rise given the sustained interest from Thai, Chinese, and South Korean nationals as well as the rising arrivals from Myanmar's emerging tourist markets such as Malaysia and India. We forecast Asian tourist arrivals to spike in 2019, especially as more Chinese and Japanese businessmen travel and invest in Myanmar. Further improvements in accessibility to Yangon should facilitate the entry of foreign businesses, further boost business hotel performance, and eventually stir MICE demand.
GOVERNMENT REVISITS CAR PARKING REGULATIONS TO MORE REASONABLE RATIOS There remains a widely untapped demand for low and midtier segments. But because of the requirement for condominium projects to provide 1.2 parking spaces per unit, developers are forced to build larger units. This key barrier will likely be modified in 2019 as the government realizes that improvements in the regulation allowing smaller unit offerings could potentially help address affordability. This aspect will be vital in addressing the needs of middle-income buyers and renters, who will likely become the mainstay in the coming years.
THE EMERGENCE OF LOW & MID-TIER RESIDENCES In 2019, more developers will start expanding their mass market as they plan to introduce more low-cost residences. Lower-tier but modern apartments and condominiums are likely to witness better sales performance. Buyers are likely to gain more confidence towards basic but modern developments, smaller in size and priced more reasonably. Favourable mortgage and deposit arrangements will change the residential market, which traditionally has been out of reach for majority, especially middle-income earners.
DEMAND FOR CREDIT TO GROW STRONGER In the coming years, the demand for credit will remain strong, and banks could deliver more diversified products to serve their customers. The introduction of term loans helps the banking sector to play a more important role in channeling savings to longer-term loan demand from the various sectors, especially real estate. On the retail banking side, while diversification is still at a very early stage, more banks are likely to start offering mortgage loans with flexible payment terms (e.g. downpayment stretched up to 25 years) to finance affordable residential projects, which could potentially be a fast-growing market in 2019 onwards.
MANUFACTURING SECTOR TO BOLSTER DEMAND FOR INDUSTRIAL SPACE the continuous surge of manufacturing investments in the country should propel the demand for industrial space and standard factory buildings in 2019. Manufacturing companies will likely put up facilities in industrial parks such as Thilawa SEZ as these locations are near key air and road infrastructure projects that substantially bring down the cost of doing business and serve as catchment areas for skilled manpower and a continuously rising consumer base for manufactured products. However, high industrial rates and lack of quality facilities could potentially continue to pose challenges. On the other hand, this could provide opportunities for developers to offer build-to-suit solutions
MANDALAY CITY AS A KEY PROPERTY INVESTMENT DESTINATION In terms of industrial production, most of the manufacturers in Mandalay are involved in agro/food processing, machinery and the production of a limited range of consumer goods. Given the potential to further develop Mandalay s trading and logistics sector, more companies will likely engage in light manufacturing. Looking ahead, the construction of the BCIM economic corridor, which will comprise not just roads and power lines, but also industrial cities along the way, will most likely create ample opportunities for developers, investors, and overseas service providers with technical and expert knowledge in areas such as infrastructure construction, urban planning, and project management to enter the market. This will facilitate knowledge sharing and technological transfer through partnerships between local and international companies, and will help to enhance the overall trading, logistics, and real estate capabilities of Mandalay in 2019 onwards.
WAVES OF ECONOMIC REFORMS AND SECTORIAL LEGISLATIONS While progress has been made, much remains to be done in this area, with 2019 likely to see further legislative efforts. In 2019, a surge in real estate investments is likely as venture capitalists take advantage of opportunities that will arise from further enforcement and legislation of government policies such as the regulations under Condominium Law 2016 and Condominium Rules 2017; the relaxation of foreign ownership restrictions on retail and construction; increased leniency in visa requirements for several of Myanmar s major trading partners; bylaws setting out rules and regulations for global and domestic tour operators, hotels, guest houses, and regional tour guides; and amendments to the existing procurement law and business registration systems which should entice more developers to take part in the government s ambitious infrastructure development programmes.
FOR MORE INFORMATION REGARDING THIS PRESENTATION: KARLO POBRE Deputy Managing Director Karlo.Pobre@colliers.com TEL +95 (0) 979 573 3378 JOSHUA DE LAS ALAS Advisory Manager Research and Advisory Services Joshua.DeLasAlas@colliers.com TEL +95 (0) 997 920 2532 COPYRIGHT 2019 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.