Abandoned colonial buildings in Yangon could be golden opportunities for Thai firms to turn them into hotels, which are in high demand to serve the rising number of visitors.
Myanmar is the latest destination on the list of travellers and businessmen from around the world as the country emerges from decades of isolation. Last year, over one million visitors made their way to the country, compared with 816,000 in 2011.
But Myanmar is suffering from a major shortage of hotel rooms. There are only about 28,000 rooms across the country. However, in every obstacle lies an opportunity.
Many long-neglected buildings, formerly government offices, line the streets of Yangon after government offices were relocated to the new capital of Nay Pyi Taw. These buildings were mostly built in the 19th century when Myanmar was part of the British Empire. They are rich in cultural heritage, built in the European style. There are 187 of them on the Yangon City Heritage List of old buildings and structures, waiting to be preserved.
The government has put some of these buildings up for lease or sale. As Myanmar is going through an economic transition, there is huge demand for office space and accommodation.
In Yangon, there are two main opportunities in the real estate market – development of medium-and big-size projects and construction and renovation of colonial buildings into boutique hotels or restaurants.
Thant Myint U, a well-known Burmese historian and chairman of the Yangon Heritage Trust, a non-governmental organisation that aims to promote and protect Yangon’s architectural heritage as part of a comprehensive urban plan, last week urged the government to set up a framework to balance the demands of investors and locals.
“We have to make investors happy, make them confident that they can make money in the future and that people are protected in terms of public interest and we protect our beautiful city,” he said.
As opportunities are made available, the Myanmar Investment Commission has pointed out that if SMEs are interested in Myanmar, they should not do it alone.
“It would be helpful if the SMEs do not come on their own but form an association. Together they can make it. They can twin with local companies here so they can pass the requirements,” said Professor Aung Tun Thet, a member of the commission.
One of the major problems in transforming old buildings may not be capital but the ownership of the buildings.
“Many are in dangerous condition. How to acquire and lease property is the key to this,” said Tony Picon of Colliers International Thailand.
A good example of the renovation of a colonial building is the US$350-million project by Serge Pun and Associates in conjunction with Singapore-listed Yoma Strategic Holdings, which is also owned by Myanmar tycoon Serge Pun.
The project includes the renovation of the old Railways Ministry headquarters and the development of FMI Centre and Grand Mee Ya Hta building. The aim is to turn these buildings into two office buildings, two serviced apartment towers, two hotels and one retail mall. It is set to become a landmark of Yangon.
The renovation of these buildings is likely to attract many tourists. However, there are some obstacles along the way.
“The first thing to do is to find out what we are dealing with because it has been here since 1896. It’s 115 years old. Obviously, the old plan has been lost, so we engaged a lot of specialist companies to perform a preliminary investigation of the building structure and work out how to strengthen, repair and conserve it,” said Paul Anslow, an engineer from Meinhardt Myanmar who is involved in the project.
The real construction work is likely to begin in six months. But it will take at least three to five years for the renovation to be finished. The overall development of the project may take longer.
To renovate the old buildings, money, expertise, time and other factors are very important. This raises the question of whether it is worth the investment to restore the buildings to put in use again.
Anslow said: “Primarily, you need to look at what was its original usage and condition, what its condition is nowadays, and what do you want to do with that building in the future. So, if it’s still in good condition, perhaps there’s not too much cost involved.
“However, if it’s in poor condition, there’s going to be a lot of investigation procedures required to bring that up to standard,” Paul said.
With Yangon experiencing a hotel room shortage, many companies are accelerating construction to meet the high demand. However, according to a survey by Colliers International Thailand, most new construction projects are expected to finish later this year or within two to three years.
For new investors who may have an interest in turning old buildings in Yangon into business opportunities, some of the important steps to keep in mind are – prepare a business plan and required documents.
More details can be found at www.dica.gov.mm or www.mnped.gov.mm.
Thai firms should apply to the Myanmar Investment Commission for licence approval. To enjoy a better chance in negotiations, SMEs should join hands – find a local business partner via business matching. But most importantly, they need to study the laws, rules and regulations.
If Myanmar can find a balance between preserving heritage buildings and filling up high demand for office space and hotels, Yangon will definitely be one of the most prestigious cities in Asean.
This is the first of our series from Myanmar. Next is the soft drink war amid Coca-Cola and Pepsi’s invasion.