Record Surge in Supply Expected in 2018
As of Q1 2018, Yangon's total retail stock grew by 16,000 sq m (172,223 sq ft) of leasable area, a 5% increase YOY. This rise in supply was driven by the completion of four new developments, half of which are supporting retail components: Golden City Retail and Min Ye Kyaw Swar Tower located in the Inner City Zone; while the other two are shopping malls Super One and Ocean Super Centre situated in the Outer City Zone. The supporting retail projects collectively represent more than 10,500 sq m (113,021 sq ft) of leasable space, whereas shopping centers brought in only 38% of the overall added stock.
Nonetheless, Colliers expects substantial new completions in 2018. In fact, nearly 75% of the overall future supply are slated to complete this year, totaling close to 71,000 sq m (764,237 sq ft) of leasable area - a new record high. Looking closely, Colliers observed that all future projects this year represent the same retail categories as in Q1 2018. The supporting retail category represents the smaller share of future supply this year. Space @ Yankin by Crown Roofing Co., Ltd., Golden Link by Htike Sin Co., Ltd, The One Shopping Mall by Creation Myanmar Groups of Company Limited, and Secretariat Retail by Anawmar Art Group are some of these integrated supporting retail components that will deliver more than 7,000 sq m (75,347 sq ft) of leasable area.
Dominating the pipeline are the shopping mall projects. Spring Line, Yadanar Mall, Fortune Plaza (Phase 1), Kantharyar Shopping Mall, and Harmony Square are the shopping centers set to complete this year, collectively representing more than 65,500 sq m (705,036 sq ft) of additional space. Looking ahead, additional stock in the next two years is meagre. Colliers see this as a green light for developers to pursue new and better projects as well as modernize offerings to align with Yangon’s changing consumer behavior.
Proper Product Positioning Necessary
Regionally, various trends are now taking shape driving malls to change their identity given the overall changing consumer preferences. Moreover, it has been observed that shopping malls in ASEAN countries have shifted their meaning and focus over the years – now creating more favorable gathering places, and encouraging better social cohesion. Given the adverse weather conditions and increasing urban congestion, some large-scale retail centers have in fact been branded as the “new public parks” with emphasis on open spaces and offerings that successfully entice higher foot traffic. While the concept remains new in Yangon, it is however slowly materializing.
Over the past years, Colliers has witnessed significant progress in the local retail scene. Going forward, we encourage developers to continually adopt new global concepts which capitalize on the city’s increasing young population, and on the improving spending confidence especially from the lower-middle to middle-income buyers. We strongly advise developers to position their retail projects along these key factors:
(i) Differentiation of consumer offerings with a focus on experience. Developers should start incorporating value-added elements and attractions (movie theaters, playgrounds, theme parks, spas, fitness clubs, arts centers, bars, concerts, etc.) that attempt to recast the concept of new urbanism.
(ii) Increasing efficiency of the current mall base through tenant mix diversification. With brands becoming broadly repetitive across Yangon malls, we continuously advise retailers to create a well-curated tenancy mix. We also suggest introducing more mid-tier brands fit for the population's modest income level.
(iii) The exploration of new formats and commercial real estate opportunities. Besides location being a key consideration for malls, a differentiated design and structure (e.g. higher ceilings, water features installations, indoor pocket gardens, curtain layout designs, clerestories, etc.) is increasingly as important. Looking ahead, developers must no longer envision themselves as just professionals who convert ideas from blueprints to real property, but instead as customer-facing providers of a modern retail experience.
Healthy Occupancy to Persist
Given the volume of stock delivered in Q1 2018, the occupancy rate declined marginally, however remained above 90%. The anticipated hike in supply in 2018 is projected to exert a downward pressure on occupancy for the forthcoming quarters. However, strong pre-commitment rates should retain the number at an all-time high. Meanwhile, the average rental rate remained at the USD $32 per sq m per month level. Colliers expects further introduction of higher quality projects to support premium rents in the near to medium term, to be capped in moderation in the next two to three years as competition among landlords may start to increase.