Monday, January 21, 2013

International companies concerned with high rent in Myanmar


YANGON: High costs for office and residential spaces have become major concerns for international companies trying to set up shop in Myanmar.

Prices are expected to rise further, as demand outstrips supply despite the construction boom.

Observers say the situation is unlikely to change - partly due to shady business deals of the past.

Students from the Singapore International School in Yangon used to have their classes at a downtown five-star hotel.

Safety was the main reason for its location, and it was also affordable then.

The school has shifted its campus to an upscale residential area.

"In the last couple of years - the last two to three years - we've seen rent go up by as much as 50 per cent or more. Some places have gone up by nearly three to four times. And of course the lack of hotels, class A (most sought-after offices in prestigious locations) offices in Myanmar is a problem. So most places still operate out of houses, bungalows in Myanmar," said Argus Ang, managing director of RVi Academy in Yangon.

Several United Nations agencies - which are still operating out of international hotels in Yangon - are also expected to find alternative spaces, as their rents spiked due to a severe shortage of hotel rooms.

Also fighting for space are many international companies, which have swarmed Yangon and other major cities, since Myanmar opened its doors.

The lack of office space has become a major obstacle.

Dennis Lian Uk, managing director at Myanmar Golden Rock International said: "If you look at Yangon city we have only the Sakura Tower, FMI Centre and the new Centrepoint. That's it. These are the only office towers in Myanmar."

Sakura Tower is fully occupied.

Rent there stands at more than US$50 per square metre - it is more than three times the rental in downtown Jakarta.

There is no indication prices will moderate anytime soon, despite a construction boom.

In fact, analysts predict rents in Yangon could reach as high as those in Beijing and New York - hitting more than US$100 per square metre.

Some are blaming past shady business practices.

Judy Ko, country coordinator at Bower Group Asia said: "Previous years, there was money laundering that allowed you to buy all these real estates, properties, land and so on. And paying a lot of (money) - in terms of US dollars, in millions. So that affects right now the cost of office space, cost of living quarters or service apartments."

Colonial buildings in Yangon that once housed government offices provide an alternative to businesses seeking office space.

But the high cost of preservation work, coupled with strong rejection by conservation groups, will likely deter any prospective investors.

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