Market disequilibrium for office space and long-term optimism on residential apartments driving real-estate market

It is clear that Sri Lanka has enjoyed a sustained growth in the supply of high-end luxury apartments.

In 2009, the semi-luxury and luxury housing stock stood at just 783 units with the number increasing beyond 4,000 units by 2016 and when calculated the number of developments that have been approved or are currently under construction, then the number of units will top 14,000 by 2020, the 2018 Research Intelligence Unit (RIU) annual report says.

“An upward incline in the market is always good news but also carries with it the demand of hard work, greater requirements on knowledge and data as well as rising competition. Following a good year for the Sri Lankan real estate industry last year, 2018 promises to be another exiting year that has already witnessed the enactment of several government initiatives that we expect will serve to build international investor confidence,” Roshan Madawela, Founder and Chief Executive of RIU says.

The market will certainly benefit from the foreign and expat community who are likely to play a more significant role in the coming years ahead with the Cabinet approving new visa regulation changes for visitors and expats early this year. “Already, the number of dualcitizenship that has been given to the diaspora community has increased significantly according to our sources,” the report is quoted as saying.

According to the newly released report the Chinese Port City will function as a catalyst for future development and investment and the development process its self, which may last for up to another 25 years, will serve to increase demand for residential, commercial and hotel real estate within the prime Colombo area. According to CHECH Port City, it will also create more than 83,000 jobs. If we consider that 10 percent of these will be at the senior management and consultant levels, then we are looking at new demand from around 8,300 professionals who will be working on this project.

On the commercial office space the RIU report says growth in the service sector segments like wholesale and retail trade, hotels and restaurants, transport and communication and banking, insurance and real estate will continue to drive demand for office space whether it is Grade A or B.

As the middle class grows and income rises, domestic consumption will increase with time and the demand for more international brands will grow, in the retail market space the report says. Retail sales are forecasted to grow to US$ 51 billion by 2022—up 70 percent from 2017 and per capita income will rise sharply to US$ 7,500 by 2020 from US$ 4,000 in 2016 according to most agencies. According to RIU’S market intelligence, this sector has many shortcomings which in turn can be made into opportunities by the developers.

“In the current context Sri Lanka is still driven by the traditional shopping experience, in fact the local consumer has not really experienced the real International shopping mall experience,” the report adds.