Yangon office market report 2014!

• Accelerating success. Research & Forecast Report Yangon | Office Market 2Q 2014 Demand likely to outstrip new and quality office supply Investment interest heightened towards the end of the second quarter with both developers and investors closely pursuing potential commercial deals in the office sector. The total supply pipeline is then only seen to further augment to now at 300,000 sq m. Due to robust demand, occupancy rates in both the Inner City and Outer City zones are at an all-time high while rates in Downtown Yangon, where all top-tier office buildings are located, have improved at a moderate pace. However, as the government grants more foreign business licenses, particularly in the banking industry, Colliers predicts that demand will outstrip the availability of top-tier office spaces in the medium term. Meanwhile, Yangon’s premium office rents remain the highest in the ASEAN region. Though unchanged QoQ, the forecast direction on the average rate is set to move upwards and breach the USD100 per sq m mark in the next twelve months. Forecast Direction 2Q 2014 – 2Q 2015 New Supply Occupancy Rent 
• Market to be underserved despite healthy supply pipeline Positive business sentiments arose in the second quarter of the year resulting in stronger investment interest towards the property market, particularly in the commercial office sector. High rental and occupancy rates going forward are an inducement for further interest. As an outcome, office building construction activity in Yangon is expected to further heighten, with pipeline projects now collectively exceeding over 300,000 sq m of gross leasable space in some 18 new office developments. The number will soon build up as potentially 15 more projects, presently at the initial planning stages, are likely to be launched. Yangon Office Stock Source: Colliers International Myanmar This year alone, the city is expected to witness further growth in commercial building developments with new office spaces to rise by 76% YoY or an additional supply of over 60,000 sq m. This will drive Yangon’s total office stock to reach over 140,000 sq m by year-end; and eventually doubling in 2015. Despite the healthy supply pipeline, the market is still seen to be underserved going forward as the government is continuously geared to grant more foreign business licenses in the succeeding months; while Myanmar continually offers investment opportunities in the longer term. Even on a regional level, the city severely lags behind its ASEAN counterparts in relation to the amount and availability of quality office spaces. Regional Office Stock Source: Colliers International Myanmar For instance, Yangon trails next to Hanoi’s office stock which is 12 times higher; and represents a meager 2% of Kuala Lumpur’s over nine million sq m of office space. Similarly, the supply of international grade A offices in the city is still non-existent while the amount of lower international grade buildings remains scant. New quality developments on the rise However, some developers have now shifted to delivering improved quality buildings. These projects are slated to come online starting this year with the opening of Union Financial Centre in Downtown Yangon; and potentially future Grade A or B offices in most mixed-use and or integrated upcoming developments elsewhere in the city, such as Sule Centre, HAGL Myanmar Centre, Dagon City, Golden City, and Kantharyar Centre. Meanwhile, renovations and refurbishments have similarly been evident during the recent months. Some older buildings are now in the process of being converted to new office spaces as developers rush to serve the pent-up demand. For example is the former Ministry of Transport building which will offer nearly 2,000 sq m of new office space once fully-renovated in the next six to eight months. Others are Prime Hill Business Center and York Centre, both located in Dagon Township. 2 Research & Forecast Report | 1Q 2014 | Yangon | Office Market 
• Notably, the number of serviced offices have likewise continued to rise since the first had set up in 2013. As of 2Q 2014, the total room stock for serviced offices totaled over a hundred rooms representing some 11 business centers - catering to new foreign business entities initially establishing a presence in Yangon. The number of new foreign entrants is only seen to further augment going forward. Serviced Office Cummulative Room Stock Source: Colliers International Myanmar The entry of foreign banks to lead growth in office demand In 2Q 2014, the Yangon city-wide occupancy rate slightly improved by a percentage point QoQ to 88% while supply remained unchanged at 99,900 sq m. This represents an occupied stock of close to 88,900 sq m. The Outer and Inner City areas remain the most preferred as occupancy rates in all buildings are in an all-time high level. With fewer supply and attractive rents, both districts are projected to be near or full occupancy in the long term. Meanwhile, occupancy rates in Downtown Yangon continue to improve consecutively over the last three quarters albeit at a more modest rate – by a percentage point on a quarterly basis. Colliers projects the rate to improve dramatically once the government allows new waves of foreign business to operate in the country. This especially entails large-scale MNC’s necessitating premium addresses in Yangon. In particular, the government is set to award as many as 10 foreign bank licenses in the next three months which will potentially spur demand for better quality offices. The entry of foreign banks along with the opening of the stock market in 2015, will eventually lead to a growth in Myanmar’s financial market driving companies in that sector to set-up office in Yangon. Nonetheless, with very limited quality offices in the pipeline, Colliers predicts that office space requirements are likely to outstrip top-tier supply in the medium term. Average Office Occupancy Rate by Locationa Source: Colliers International Myanmar 3 Research & Forecast Report | 1Q 2014 | Yangon | Office Market a Revised & Rebased At present, the direction for Yangon city-wide occupancy rate is to continually trend upwards. While a substantial 40,000 sq m of new office space is scheduled to be introduced in the second half of the year, an artificial drop in take-up rate may transpire. However, the anticipated surge in demand will only set the overall occupancy rate to breach the 90%-level in the next twelve months. Premium rents will hit over USD100 per sq m in the next twelve months The city-wide average rent remained relatively stable in 2Q 2014 to end at USD 72 per sq m monthly. This translates to about USD 36,000 monthly for a 500 sq m office space. Both the average rents in Downtown Yangon and Inner City area are unchanged at USD 87 and 58 per sq m monthly, respectively; while a slight uptick in average rent is realized in the Outer City area. The addition of new office buildings in the second half of the year may cause incremental pressures on rent as landlords are set to offer competitive rates. 
• Meanwhile, Yangon continues to post one of the highest average Average Office Rental Rate by Locationb rents in the ASEAN region. The city’s current rental rate range between USD40 to 50 per sq m monthly for a low grade building, 100 and USD70 to 95 per sq m monthly for the mid-grade. While the average premium rate is unchanged at USD88 per sq m QoQ, it 80 consistently is above Singapore’s USD75 per sq m, despite that 60 all offices in Yangon are below international Grade A building standards. The forecast direction for premium rents remain 40 upward and is projected to hit the USD100 per sq m mark in the 20 next twelve months. 0 2011 2012 2013 1Q2014 2Q2014 Karlo Pobre Research Manager Research & Advisory +95 (0) 931 336 099 karlo.pobre@colliers.com Theint Theint Thwin Researcher Research & Advisory +95 (0) 950 267 22 theint.thwin@colliers.com Tony Picon Managing Director | Myanmar +95 (0) 942 103 4026 antony.picon@colliers.com Regional Prime Office Rental Rates (USD/SQ.M./MONTH) United States: 146 Canada: 44 Latin America: 25 Asia: 38 ANZ: 148 EMEA: 84 $2.1 1.46 15,800 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) 931 491 678 485 offices in 63 countries on 6 continents billion in annual revenue billion square feet under management professionals and staff Source: Colliers International Myanmar Source: Colliers International Myanmar b Revised & Rebased

Colliers International Yangon Office Market Report 2Q 2014 from Myanmar-Property