Colliers International's latest report, Yangon Serviced Apartments Q1 2018, suggests a lack of new supply in the market has eased the intense competition in Myanmar's serviced apartment sector.

Average rents inched up during Q1 2018 with no new projects introduced. Colliers expects supply to remain limited in the immediate future. Competition is expected to gradually build with the stock doubling in the next three years. A recent study has revealed that expats in Yangon are some of the most financially confident in the world. And while demand for management executives is well addressed, expats with modest housing budgets remains largely underserved. Colliers urge developers to tap into this market by introducing limited or non-serviced apartments instead equipped with amenities and facilities of international quality.  

Colliers' Forecast At a Glance

• Demand: Demand remains untapped for lower tier developments. However, future supply remains unsuited being geared towards upscale segment.
• Supply: Colliers expects high-end supply to double in the next two to three years. Supply remained the same for Q1 2018 with 2000+ rooms available. 
• Occupancy Rate: Despite rent increases, demand appears resilient as occupancy improved to 82%. 
• Rent: For the existing quality, rental rates in Yangon remain higher than in most key cities in Southeast Asia. Rental rates for studio, one-bedroom and three-bedroom categories rose by 2-4%. 

No New Supply Foreseen Until 2019

Supply remained the same in Q1 2018 with more than 2000 rooms available. Senior Analyst for Colliers International Myanmar Research and Advisory Department, Joan Mae Lee says "The majority of stock is still located in the Inner City while only a limited number found in the Outer City."

Latest developments:

• Lotte Serviced Apartments in the Inner City
• Northern Inya Serviced Apartments in the Outer City 

Expansion and renovations:

• Clover Suite Royal Lake
• SOHO Diamond
• Sakura Residence 1

With the lack of serviced apartments in Downtown, Colliers has observed that select upper-scale hotels have converted some of their rooms into "serviced suites" by providing features such as kitchenettes and long stay options.

"Though this concept is still in its nascent stages, the underwhelming performance of many upscale hotels may drive operators to take this into greater consideration and tap into the serviced apartment market instead," Lee explained. Upcoming developments for the remainder of the year are likewise quite limited with only the extension of Clover Suite Royal Lake in the pipeline representing more than 90 rooms. The majority of the upcoming projects are not due until Q1 2019. These are Somerset @68 Residences and Kantharyar Serviced Residences.

The Report also suggests that Downtown will likely see its first dedicated upper-scale serviced apartment with Sedona Suites scheduled to be completed in H1 2019. However, construction appears sluggish, and the project will likely be delayed. Other developments are geared towards the Inner and Outer City namely:

• The Loi (Bahan)
• Golden City Serviced Apartments (Yankin)
• HAGL Myanmar Serviced Apartments (Bahan)
• Inno City (South Okkalapa)

"Most of these upcoming projects have shown little signs of progress and some are likely to be shelved," said The Htet Oo, Research and Advisory Manager for Colliers International Myanmar. "Overall, we urge developers to diversify their offerings into more affordable products such as limited or non-serviced apartments. This is because most of the future supply remains geared towards the upscale segment," she said.

Myanmar ranks as the third most ideal place for expatriates in terms of personal finance. A recent report from InterNations' 2017 Expat Insider Report revealed that expats in Myanmar are one of the most financially satisfied in the world topping the list when it comes to disposable income. "Though Yangon also belongs to the top 100 cities with the highest cost of living for expats, it must be taken into consideration that many expats in Myanmar are in managerial and/or above positions," Lee said. Nearly one in three of the survey respondents described their status as a manager compared to the average of one in seven worldwide. "Based on our sampling frame, we likewise observed that roughly 50% of expatriates in Yangon hold management to top executive positions such as country heads, junior executives, or managers with monthly housing allowances of an estimated USD$3000 and above; and with a housing preference for villas, serviced apartments, and international quality condominiums," she explained. However, Colliers still sees a widely underserved market of regular professionals with modest budgets of USD$500 and over which would be ideal for a limited or non-serviced apartment.

Rates Inched Up with the Lack of New Supply

According to Oo, operators were confident in raising their prices in Q1 2018 due to the anticipated lack of new supply. Rental rates for studio, one-bedroom and three-bedroom categories rose by 2-4% accordingly. Despite the increase in rents, demand appears resilient as occupancy also improved albeit at marginal levels, to end at 82%. Colliers has observed that occupancy levels for upscale serviced apartments decreased by 5% while lower grade apartments increase by 1-3%. "Overall, given the expected incoming supply of upscale developments in the medium term, Colliers recommend developers to focus more on the underserved lower tier category by providing international quality limited or non-serviced apartments," Lee concluded.

Click here to view the Yangon Serviced Apartments Q1 2018 Report.

For more information phone or email Karlo Pobre of Colliers International via the contact details listed below. 

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