Yangon More Expensive Than NYC Sparking Boom: Real Estate

Sean Danley has spent the past six months scouting  office space  in Yangon after being sent to establish the Myanmar branch of his U.S.-based employer.

He looked in the city’s three sole 1990s-era towers, where annual rents have climbed to more than $100 a square foot, compared with less than $75 in  downtown Manhattan, according to broker CBRE Group Inc. Too expensive, he said.

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Pedestrians cross a road in front of the AGD Bank tower, right, and the Centrepoint towers in Yangon. Photographer: Dario Pignatelli/Bloomberg

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Scaffolding surrounds a condominium building under construction in Yangon. Photographer: Brent Lewin/Bloomberg

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Workers labor on a construction site located next to the Traders Hotel, unseen, in Yangon. Photographer: Dario Pignatelli/Bloomberg

The villas he considered either didn’t have safety exits, weren’t clean, required sharing space with other companies or were in odd locations -- all unsuitable to the image of his $29 billion in revenue engineering and construction company, which he said he wasn’t authorized to identify. After seeing 10 places and losing one possibility to someone faster with his “bag of money,” Danley is still looking.

“We can’t move into a space where someone’s cooking up nasi goreng on the sidewalk all night,” he said, using the Indonesian name for fried rice.

Developers are rushing to solve Danley’s problem, one faced by hundreds of multinational companies setting up operations in Myanmar following its political opening and easing of international sanctions. Yangon, the commercial capital, needs at least 8.7 million square feet (800,000 square meters) of office space to support the influx, according to  Yoma Strategic Holdings Ltd. (YOMA)  About 1.9 million square feet will be available by the end of 2015, compared with 600,000 now, the Myanmar office of broker Colliers International UK Plc estimated.

Attractive Market

“With rentals going up, and the shortage going to become more acute in at least the next seven years, it’s an attractive market for foreign developers,” said Cyrus Pun,  executive director  of Yoma, a Singapore-listed company that derives most of its revenue from developing property in Myanmar and has seen its share price more than double since the April 2012 elections and subsequent loosening of sanctions that have allowed less-fettered foreign investment.

“There’s still a big gap to be filled,” he said in a telephone interview, adding that Yoma is in confidential talks that may lead to joint projects with Japanese, Singaporean or Indonesian developers. “Whatever is being built right now will not satisfy the immediate demand.”

The opportunity has lured other Southeast Asian developers, including Singapore-listed  Soilbuild Construction Group Ltd. (SOIL)  and  Vietnam’s HAGL Joint-Stock Co., along with  Hong Kong’sShangri-La Asia Ltd. (69)  Each has announced an office, retail, residential apartment or hotel project that it plans to build or manage. At least three more office buildings are being built by local developers, Pun said.