Upload
himadri-mayank
View
219
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Real Estate in Sri Lanka
Citation preview
Real Estate in Sri Lanka – Prospects and Potential Translating Economic Growth into Real Developments in Colombo April 2012
2
Per Capita
Income targeted
to cross USD
4,000 by 2016
Highest literacy
rate in South Asia
at 94.2%
2 successive
years of 8%
growth in GDP
(2010 & 2011)
IMF upgraded Sri
Lanka to Middle
Income Country
in 2010
Tourist arrivals
have grown at a
CAGR of 38%
during 2009-2011
Low Costs of
Operations and
Human
Resources
Workers’
remittances
multiplied over 3.5
times during the
last decade
Colombo Stock
Exchange has given
returns at a CAGR
of 48% during
Jan09-Mar12
Sri Lanka – An Emerging Economy
3
Offices in Colombo
Putting Function Before Form
Stock and Supply of Office Space
Operational 5 million sq ft
Under Construction 765,000 sq ft
Proposed 6 million sq ft
The office stock will multiply 2.4 times in the next 4-5 years!
Average Occupancy of Office Space
2009 60%
2011 90%
High occupancy levels of 90% have resulted in demand trickling down
to inferior grade properties
Source: Jones Lang LaSalle, 4Q11
World Trade Centre, Colombo
4
BangaloreGurgaon
ChennaiColombo
ManilaChengdu
Guangzhou
Beijing
Ho Chi Minh City
Hanoi
Kuala Lumpur
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
0 10 20 30 40 50 60
Ave
rage
Ren
ts (
USD
psf
pm
)
Office Stock (million sf)
Office Rents in Colombo
Among the lowest priced markets in Asia Pacific
Majority of office space in CBD and SBD is available in a rental range of LKR 100–
150 per sq ft per month, comparable to Chennai and Bangalore rents
Source: Jones Lang LaSalle, 4Q11
5
Major Demand Drivers for Office Space
Banking, Financial Services and Insurance
The sector contributes to 8-9% of
the country’s GDP
22 banks (including 11 foreign)
operate in Colombo Metropolitan
Region
Number of banking branches in Sri
Lanka has been increasing at an
average rate of 7% per annum
since 2007
Nearly 1,804 more banking branches are projected to open by 2015, resulting in
demand for nearly 4.5 million sq ft of office space across cities
Source: Central Bank of Sri Lanka, Jones Lang LaSalle
Major Foreign Banks Major Domestic Banks
6
Major Demand Drivers for Office Space
Information Technology
Colombo ranked 21st in the AT Kearney
Global Services Location Index 2011
Ranked 6th in financial attractiveness,
ahead of India, China, Central Europe
and Eastern Europe
Included among the Top 9 in Asia pacific
Gartner's 30 Leading Locations for
Offshore Services (2010-2011)
7 million sq ft of additional office space required during 2012-2015 to meet the
TARGET of USD 1 billion annual revenues and 100,000 employees by 2015
Source: Jones Lang LaSalle
Revenue
(USD mn)
Employees Office
Space
(mn sf)
2011 392 40,000 4.5
2015F 1,000 100,000 11.5
Orion City, Colombo
OFF-SHORE CENTRES IN COLOMBO
INFORMATION
TECHNOLOGY
AD
VA
NTA
GE
SR
I LA
NK
A
HUMAN RESOURCE
COST EFFECTIVENESS GROWING INDUSTRY
IP PROTECTION
91.4% literacy rate and
English as the primary
language of higher
education
Produces 30,000
graduates each year
Full tax holiday of 4-12
years depending on
minimum investment size
Custom duty exempted
on the import of project
related capital goods and
raw materials
Salaries lower than other
outsourcing destinations,
including India
Low real estate and
operational costs
Achieved export revenues
of USD 392 mn and
employed over 40,000
employees
IT exports have doubled
during 2006-10
Signatory to Berne
Convention and WTO /
TRIPS
Enacted Electronics
Transactions and
Computer Crimes Act
INFRASTRUCTURE
Adequate power with
100% up-time
Well established telecom
and data network with
ample redundancies
POLICY SUPPORT
Major Demand Drivers for Office Space
Information Technology – Advantage Sri Lanka
8
Real Opportunities in the Office Sector
Leapfrogging Integrated developments at suburban
locations will offer offices at lower rents
for outsourcing
Consolidation Opportunities to achieve cost rationalisation
and reduction of leverage through
consolidation and decentralisation of self-
owned and single tenanted offices by banks
and conglomerates.
Since a major portfolio of offices held by
banks is self-owned, sale and lease back to
prospective investors will provide
opportunities.
Real Value through
Refurbishment Refurbishment of Grade B and C
properties to Grade A will offer quality
space to prospective occupiers
9
Retail in Colombo
Designing Spaces for the Consumer
The retail mall stock will multiply 2.6 times in the next 3-4 years!
Eight operational malls with 0.65
million sq ft of retail space
Three malls with 1.05 million sq ft as
supply over the next 3-4 years
Source: Jones Lang LaSalle, 4Q11
Proposed Fairway City Mall, Colombo
Retail dominated on High Streets by Super-Markets and Mini Majors
High Street Supermarkets Mini-Majors
Galle Road
Duplication Road
Sri Jayewardene Mawatha
Cargills Food City
Keells Super
City Co Op
Lauhgs
Premasiri
ODEL
Abans Abstract
Fashion Bug
Hameedias
Barefoot
No Limit
Glitz
10
Real Opportunities in the Retail Sector
Experience Retailing Urban Colombo requires 2-3 malls
which provide a holistic shopping
experience with an eclectic mix of
leisure, entertainment and cultural
experiences, housing anchor stores,
multiplex, food courts, gaming zones
and atrium spaces
Tourism Retailing Destination Retailing
Paradise Road, Colombo Orchard Road, Singapore Mall of the Emirates, Dubai
11
The Residential Sector
The Segments of Housing
Luxury segment units (>LKR 45 mn) are mostly sold out, while availability in mid-
level segment (LKR 10-25 mn) is high
Source: Jones Lang LaSalle, 4Q11
12
Real Opportunities in the Residential Sector
Affordability Prominent developers have massive opportunities
of scale available at the bottom of the pyramid
and construct housing units for lower mid-income
and low-income segments
Up in the Sky High land prices has restricted villa and plotted
developments to fringe areas of the city. With
growing demand for condominiums to lead to slew of
condominium developments.
Developers will diversify their risks and
increasingly opt for mixed-use developments at
the city core, with multiple asset classes including
high-end residential, hospitality, office and retail
space.
Havelock City, Colombo
13
The Hospitality Sector
Surge in Tourist Arrivals
Tourist arrivals to cross 1 million during 2012 and is estimated to grow at a CAGR
of 24% to reach the target of 2.5 million annual arrivals by 2016
Sri Lanka named
among the top five
destinations in Kuoni’s
2012 annual poll of
where UK customers
want to spend their
holidays. Sri Lanka
also retained the top
destination for
weddings.
Source: Sri Lanka Tourism Development Authority (2000-2011), 2012e estimated by Jones
Lang LaSalle, 2013F-2016F based on the target set by Government of Sri Lanka
14
The Hospitality Sector
Capacity Generation
There are 22,735 hotel rooms in Sri Lanka, of which 21% is of the 5-star category.
Occupancy increased from 48.4% in 2009 to 70.1% in 2010 and is estimated to be
above 80% in 2011.
Accommodation Type Number Number of
Rooms
Tourist Hotels 256 14,948
Boutique Hotels and Villas 50 577
Home Stay Units 181 560
Guest Houses 679 6,393
Heritage Homes 49 257
Total 22,735 Source: Tourism Development Strategy 2011-2016, Ministry of
Economic Development, Government of Sri Lanka
To meet the demand due to
the expected surge in
tourist arrivals,
22,500-25,500 hotel rooms
or 375-425 hotels
need to be constructed
during 2012-16 Source: Jones Lang LaSalle
JAIC Hilton Residencies, Colombo
Major Foreign Investors in Sri Lanka’s Hospitality Sector
15
Closing Thoughts
What Sri Lanka needs to become a Breakout Nation?
Maintain a high rate of inclusive growth
Increase policy support to investments
Provide geo-political stability
Improve infrastructure to cater to rising urbanisation
Decentralise growth to new urban hubs
Copyright © Jones Lang LaSalle, 2011
For more details, please contact:
Gagan Singh
Chairperson
Sri Lanka Operations
+91 98111 51610
Ashutosh Limaye
Head
Research and REIS
+91 22 3307 1512
Shankar Arumugham
Local Director
Strategic Consulting
+91 99400 66869
Simon Thomas
Assistant Vice President
Strategic Consulting
+91 98400 68451
Authors
Himadri Mayank
Assistant Vice President
Research and REIS
+91 99756 12304
Robin S
Assistant Manager, Strategic Consulting
+91 87544 04800