Sean Danley has spent the past six months in Yangon scouting office
space for his U.S.-based employer, which wants to open an outpost in
Myanmar. He checked out the city’s three office towers. Annual rents in
those buildings, none of which is taller than 27 stories, now surpass
$100 a square foot, higher than the $75 average for downtown Manhattan,
according to broker CBRE Group.
The Yangon villas Danley considered didn’t have safety exits and
required sharing space with other companies or were in odd locations—all
unsuitable for an international engineering and construction business
such as his. (Danley says he isn’t authorized to identify the firm.)
After seeing 10 places and losing one to someone Danley claims had a
“bag of money,” the executive is still looking. “We can’t move into a
space where someone’s cooking up nasi goreng on the sidewalk all night,” he says, referring to fried rice.
Finding
office space is a headache for the hundreds of multinational companies
looking to set up operations in Myanmar, a nation of 48 million that was
the target of sanctions for 15 years. Yangon, the commercial capital,
needs at least 8.7 million square feet of office space to support the
influx, according to Yoma Strategic Holdings (YMAIF). There are 600,000 square feet available now.
Some companies are operating out of Yangon hotels. Mizuho Corporate Bank (MFG)
has seen its rent at the Sedona Hotel more than double since April of
last year to $6,720 a month for 1,000 square feet, according to its
local representative, Tetsuro Nonaka. Other Sedona tenants include Yamaha Motor (YAMHF) and Kawasaki Heavy Industries (KWHIY).
Consumer-goods giant Unilever (UN)
is among companies that have rented villas, driving lease prices
skyward. A four-bedroom house that rents at $6,500 a month will probably
cost $9,500 by the end of the year, says Brett Miller, managing
director of Scipio Services, a local facilities management company.
The
imbalance between supply and demand has predictably sparked a building
boom. About 1.9 million square feet will be available by the end of
2015, according to broker Colliers International. “Whatever is being
built right now will not satisfy immediate demand,” says Cyrus Pun,
executive director of Yoma, a Singapore company that derives most of its
revenue from developing property in Myanmar. “It’s an attractive market
for foreign developers.”
Asian investors like Pun have a head start in Myanmar because the
country was off limits to their Western rivals for more than a decade.
The U.S. and the European Union have gradually been lifting sanctions
since Myanmar’s political opposition, headed by Nobel Peace Prize winner
Aung San Suu Kyi, won a majority of legislative seats in the April 2012
elections.
U.S. companies are now free to invest in the country,
though they are barred from doing business with ventures connected to
the former military leadership. Among the challenges newcomers face are
phone networks that frequently drop calls and a cash-only payments
system.
Ambiguous laws are holding some potential investors back.
Speaking at a July 2 press conference, Lucas Chow, chief executive
officer of Singapore’s Far East Orchard (FEOR:SP),
cited uncertainty over property rights and mortgages among the reasons
the Singaporean developer was not rushing into Yangon. “It’s a very
cowboy town,” said Chow, adding, “I don’t think we have an appetite for
that kind of market.”
The bottom line: An influx of foreign investors has pushed up office rents in Yangon to levels that surpass those in parts of Manhattan.
source: Businessweek
http://www.businessweek.com/articles/2013-08-08/myanmars-foreign-investors-face-office-space-shortage
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