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Laden by the hope of a virtuous future, Sri Lanka teems with infinite possibilities and is preparing itself to become a destination of choice. Since the end of the civil war in mid-009, the countrys economy has been on a strong growth trajectory led by determined rebuilding measures, surging tourism and increased investor confidence. After a sharp decline in growth during 008-009, it expanded rapidly by 8% in 010 and 011, and a further 7-8% is expected in 01. This makes it the second fastest growing economy in emerging Asia, after China. Low interest rates and moderate levels of inflation will boost trade and industry in the medium term, and the government is also placing increased emphasis on carrying out large infrastructure projects, which will not only improve communications in established areas, but also unlock the hidden potential of other locations. With several local and domestic investors looking to capitalise on a promising economic growth environment and improving infrastructure, real estate has witnessed an upward trend in demand and pricing. The recent upswing in the service sector from finance, tourism, and the IT/ITES industry in Colombo, has triggered a healthy demand for residential space in the Greater Colombo real estate market. The development of premium condominium projects is most prominent in the Central Business District; and sub-divided developments, row houses and villas in the peripheral suburbs have emerged as the preferred choice for middle-income buyers. However, with rising land and construction costs, it is important to be aware of the affordability of upcoming supply. Also, whether it is happening in the right locations and will it be adequate to meet the growing demand? Retailing in the country has largely been confined to established high streets, with domestic retailers catering to an urban population. Lately, Colombo has witnessed the development of some organised retail establishments in up-market locations. Given the current trend in organised
retail and brand presence, will there be significant scope for enhancing targeted retail capacity in upcoming residential locations, and will there be an opportunity to expand retail services for food and beverages, healthcare, personal care and tourism? The demand for commercial office space is driven by growth in the banking, IT/ITES and tourism sectors. While Banking, Financial Services and Insurance have an established presence with captive properties across Colombo, IT/ITES is emerging as an attractive sector. According to SLASSCOM, over 40,000 people are employed in the IT and BPO industry in Colombo and the workforce is growing at over 0% annually with low attrition rates of 10-15%. Colombo is comparatively cost competitive and has lower upward wage pressure than many established global sourcing destinations. With limited operational Grade A office space in the city, the demand is trickling down to inferior grade properties. Will this dearth of quality office space continue or will developers and investors perceive this as an opportunity to build more and attract global occupiers? What cost advantage does office real estate in Colombo provide for outsourcing? The Sri Lanka Tourism Development Authority figures show that tourism forms 0.6% of the countrys total GDP, and is one of the fastest growing sectors in the economy, growing by 9.8% in 010. With the Government setting the target for 2.5 million tourist arrivals by 2016, hotels and resorts are set to mushroom in tourist destinations. Are there enough hotels to meet the burgeoning demand from tourism? Will Sri Lanka remain a budget destination or transform itself into an exotic destination for affluent global vacationers? We shall attempt to address some of these issues and many more in the following sections of this whitepaper: Real Estate in Sri Lanka Prospects and Potential.
ECONOMY 94.2% Middle Income Country in 010 3.5 times during the last decade Top 9 7 million sq ft of office space required for
IT/ITES Sector by 2015 IMF upgraded Sri Lanka to
8% growth
in GDP (010-011)
successive years of
USD 4,000
by 2016
OFFICE
Ranked in the AT Kearney Global Services Location Index 2011
21st
Ranked in financial attractiveness, ahead of India, China, Central Europe and Eastern Europe
5th
Included among the in Asia Pacific Gartners 30 Leading Locations for Offshore Services (010-011)
USD 392 million and had over 40,000 employees in 011 USD 1 billion and 100,000 employees by 015 RESIDENTIAL 8,129 condominium units have been supplied in
Colombo during 005-011 Rental yields of
R E TA I L
Total stock of operational malls in Colombo -
647,000 sq ft
1.05 million sq ft
of shopping mall supply
3-7%
34%theofpremium category (LKR 25-45 million) in the supply of condominium units in Colombo
HOTELS
Tourist arrivals expected to grow by
Target of
75-85 hotels or nearly 3.5-4.0 million built annuallyoftillhotel space sq ft 2016 needs to be
Top Five Destinations in Kuonis 2012 annual poll of where UK customers want to spend their holidays. Sri Lanka also retained its status as Top Destination for Weddings
Localities
Colombo 01: Fort Area Colombo 02: Slave Island Colombo 11: Pettah Colombo 03: Kolupittiya Colombo 04: Bambalapitiya Colombo 05: Narahenpitiya Colombo 06: Wellawatte Colombo 07: Cinnamon Garden Colombo 08: Borella Colombo 09: Dematagoda Colombo 10: Maradana Colombo 12: Kochchikade Colombo 13: Kotahena Colombo 14: Maligawatte Colombo 15: Mutwal Hendala, Wattala, Peliyagoda, Kelaniya, Welisara, Ja-Ela, Katunayake Raja Giriya, Golf Links, Sri Jayawardenepura Kotte, Battarmulla, Talangama, Malambe, Ambatale, Dehiwala, Mt. Lavinia, Ratmalana, Moratuwa, Panadura, Piliyandala
PD - Northern
Extent
Fort Area and localities in 3 km radius
Markets
SBD area stretches to the Colombo City Municipal limits; a distance of km from CBD limits towards North, East & South
SBD
Along A3 Highway towards airport; stretches to a distance of 0 km from SBD towards North Zone extends to Kaduwela, a distance of 10 km from the SBD Along Galle Road; stretches to a distance of 0 km from SBD towards South SBD PDSouthern PD- Eastern PD- Northern
PDSouthern
PDEastern
PDNorthern
GAMPAHA
Kolonnawa Fort
Baseline
KOLONNAWA
Angoda Talengama
Kaduw
PD EASTERN
Bambalapitia
THIMBIRIGASYAYA
KADUWELA
Arangala
DEHIWALA
Dehiwala
MAHARAGAMA
Maharagama Kottawa
PD - SouthernBoralesgamuwa
Mt Lavinia Colombo Municipal Area
RATHMALANA
Ratmalana Piliyandala Angulana
Source: Jones Lang LaSalle CBD - Central Business District, SBD - Suburban District, PD - Peripheral District
Kesbewa
CBD
captive towers that are self-owned by banks, financial institutions, government bodies, manufacturing firms and conglomerates. The nearly 765,000 sq ft of office space under construction is scheduled for completion during 2012-2015. Over 6 million sq ft of office space has been planned but no ground has been broken yet. Platinum One at Bagatelle Road is expected to become operational in 2012, while AEC Towers at Khettarama Temple Road is expected to offer 60,000 sq ft of office space by 3Q12. Among the landmark office projects that are planned, Havelock City Commercial Towers and Suchir NEB are the most prominent. Orion City is expected to deliver 200,000 sq ft of additional office space, followed by 2.1 million sq ft more by 2015. Orion City is the only IT-centric development in Colombo city, with the others focused on non-IT commercial occupiers. Occupancy in the Grade A space segment is extremely high, with HNB Towers, Merchant Towers and Access Towers turning away potential customers (Figure ). The average occupancy in Grade A office buildings for the past year has been around 95% which is a dramatic increase from the occupancy levels of 2006-2008 which were around 60%. The IT Park at Orion City is over 90% occupied.
Rental Affordability
Apart from the iconic World Trade Centre (WTC), which offers office space at LKR 260 per sq ft per month, the majority of office space in the CBD and SBD is available in a rental range of LKR 100 - 150 per sq ft per month . Office space in WTC was being leased at LKR 15 - 150 per sq ft per month during 009, which indicates the rapid appreciation in rents witnessed by Colombo CBD during the last three years. Office space at Galle Road and Union Place is available for lease in a rental range of LKR 75 - 140 per sq ft per month. Orion City, which is the IT/ITES campus of Colombo, offers large IT space areas at LKR 110 per sq ft per month. In terms of real estate affordability, Colombo real estate costs are comparable to other outsourcing destinations (Figure 2) and with office space within the city, travel costs are lower than in other outsourcing destinations.
From the perspective of Grade A speculative commercial development for lease, Colombo offers limited options for prospective investors with just eight operational office buildings. Rents quoted are inclusive of maintenance charges.
1
Beijing
Guangzhou
Gurgaon Chennai
0 0 40 50
Bangalore
0 0 10 60
Location
Bank of Ceylon Mawatha, Fort Janadhipathi Mawatha, Fort T.B. Jaya Mawatha Dr. Colvin R. De Silva Mawatha, Union Place 05, Vauxhall Street, Colombo 0 Dr. Danister De Silva Mawatha, Colombo 09 Galle Road Dr. Danister De Silva Mawatha, Colombo 09
Developer
Overseas Realty Ceylon Ceylinco Limited Sithma Development Access Realties Aitken Spence St. Anthonys Industries Group CSEM Lanka St. Anthonys Industries Group
Rents3
260 15 150 10 10 110 140 110
Source: Jones Lang LaSalle, 4Q11. Notes: 1 USD = 109.76 LKR (Average during 2011) *Refurbished in 2001. Originally completed in 1960. Rents are LKR per sq ft per month, and inclusive of maintenance charges.
Rents are LKR per sq ft per month, and inclusive of maintenance charges
Country
Sri Lanka India India India India Bangladesh India India Sri Lanka India India India Sri Lanka Bangladesh India
Rank
1 4 5 6 7 8 9 10 11 1 1 14 15
Level of Competitiveness
International International International International International International International National National National National National National National National
Source: City Competitiveness Ranking (39 South Asian Cities), Competitive Cities in the 21st Century, Asian Development Bank (2011) City Competitiveness Ranking (39 South Asian Cities), Competitive Cities in the 21st Century, Asian Development Bank (2011)
4
0.0
0.0
0.40
0.50
0.60
0.80
0.60 0.59 0.57 0.5 0.50 0.50 0.49 0.49 0.46 0.44
Bank of Ceylon and Sampath Bank also have an established presence in the banking and financial services sector. Among the foreign banks that are operational in Sri Lanka are HSBC, Standard Chartered, Citibank, Deutsche Bank, State Bank of India, ICICI Bank, Indian Bank, Indian Overseas Bank, MCB Bank, Public Bank Berhad and Habib Bank (Figure 7). The number of banking branches in Sri Lanka has been increasing at an average rate of 7% per annum since 007. Since it has outpaced the annual population growth of the country, which is 0.9%7, the population per bank branch is decreasing and branch density (banking branches per 100,000 persons) is increasing.
If we linearly extrapolate these trends, nearly 1,804 more banking branches would open by 2015, increasing the branch density from 23.5 in 2010 to 30.5 by 2015 (Figure 6). Assuming a conservative average area of bank branches to be 2,500 sq ft, these would directly lead to demand for at least 4.5 million sq ft of office space across cities in Sri Lanka during 2011-15.
7,000 6,000 Bank Branches / Population per Branch 5,000 4,000 ,000 ,000 1,000 0 Total Bank Branches Population per Bank Branch Banking Branches per 100,000 Persons
005
2006
007
,716 3,749 4,007 4,19 4,533 4,858 5,180 5,504 5,872 6,256 6,66 5,9 5,304 4,994 4,681 4,511 4,51 4,029 ,8 3,630 ,444 3,269 18.9 18.9 0.0 1.4 2. .5 4.8 6.1 7.5 8.9 0.5
Source: 005-010b: Sri Lanka Socio-Economic Data 011, Central Bank of Sri Lanka 011f-015f: Forecast projected by Jones Lang LaSalle based on year moving average model Notes: 1. Total Banking Branches includes main branches and other banking offices of Commercial Domestic and Foreign banks, Regional Rural and Development Banks, National Savings Bank and Co-Operative Rural Banks. . 009a: Revised and 010b: Provisional
Banking, Financial Services and Real Estate sub-sector contributed 8.6-9.3% to Sri Lankas GDP during 1Q10-4Q10 (Bloomberg) Colombo Metropolitan Region includes Colombo, Gampaha and Kalutara. Banking outlets include banking units such as Extension Offices, Pawning Centres, Student Savings Units and Pay Offices. Data sourced from the Central Bank of Sri Lanka. 7 Population growth recorded in 2010, as per World Bank figures.
5 6
Type
State Owned State Owned
Number of Branches
In Western Provinces 142 0 In Sri Lanka 517 679
Foreign
147
216
Private Private Private Private Private Private Private Private Private Savings Bank Savings Bank
99 89 8 71 59 10 34 26 1 78 0
Source: Economic and Social Statistics of Sri Lanka 011, Central Bank of Sri Lanka
With an average floor space per employee of 127 sq ft for IT and 103 sq ft for ITES9, Sri Lanka had an estimated 4.7 million sq ft10 of operational office space occupied by IT-ITES in 2011. The medium term goal of the industry is to achieve export revenues of USD 1 billion and employment of 100,000 people by 2015. This would translate into a demand for nearly seven million sq ft of additional office space for the IT/ITES sector alone
SLASSCOM (2011) ICT Export Value 2010 IT/ITES Export Sector by Sri Lanka Export Development Board (2010) 10 27,000 employed in the IT and 13,000 employed in the ITES industry (SLASSCOM, 2011), would require 4.7 million sq ft of office space. This includes captive offices held for IT/ITES outsourcing.
8 9
Key factors that will facilitate the growth of IT/ITES industry in Sri Lanka in the coming years are:
Figure 8: Mean Monthly Salary Compensation in the IT Sector (in LKR pm) Sri Lanka*
Application Support Associate Application Support Engineer Application Support Engineer Associate Business Analyst Business Analyst Associate Quality Assurance Engineer Software Quality Assurance Engineer Associate Software Engineer Software Engineer 9,11 5,18 41,559 94,273 44,063 8,9 78, 1,7,08 -% -36% -47% -1%
India^
Difference %
Source: *Sri Lanka IT and ITES/BPO Sector Salary and Benefits Study 2011, Price Waterhouse Coopers and SLASSCOM ^Jones Lang LaSalle, Estimates for a Junior Mid-Level employee in India Notes: Some difference between Sri Lankan and Indian salaries can also be attributed to the sharp decline in the Sri Lankan Rupee. 1 USD = 109.76 LKR (Average during 2011) 1 USD = 46.67 INR (Average during 2011) 1 INR = 2.35 LKR (Average during 2011)
United Nations Development Programme (UNDP) Report, 2011 SLASSCOM (2011) 1 According to the Board of Investment Sri Lanka, the Knowledge Services sector includes IT Software Development, KPO / BPO Industry, IT and IT Enabled Services and IT Training Sectors. 14 Board of Investment, Sri Lanka (2012)
11 1
Apart from tax incentives, the Board of Investment also offers advice in site selection and purchase of land, identification of local partners, and facilitation of residence or work visas for investors and expatriate staff.
With peak demand of 1955 MW, Sri Lanka has an installed capacity of 2806 MW, 43% of which is provided by hydroelectric plants15. There is no load shedding which ensures a reliable transmission of power.
94.2% literacy rate and English as the primary language of higher education and commerce Produces 0,000 graduates annually Low attrition rates of 10-15%
HUMAN RESOURCE
Adequate power with 100% up-time Well established telecom and data network with ample redundancies
INFRASTRUCTURE
COST EFFECTIVENESS
Salaries lower than other outsourcing destinations, including India Low real estate and operational costs
IT/ITES sector achieved export revenues of USD 392 million and employed over 40,000 employees IT exports have more than doubled from USD 121 mn in 2006 to USD 294 mn in 2010
GROWING INDUSTRY
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
POLICY SUPPORT
Signatory to international treaties such as the Berne Convention and WTO/TRIPS Enacted an Electronics Transactions Act, Computer Crimes Act and is a signatory to the latest UN e-contracting convention
IP PROTECTION
14
PD - North
04 05
01
03
02
CBD SBD
10 12 13 08 09 15
PD - East
06 07
CBD
11
PD - South
PD- Eastern
PD- Southern
Shopping Malls
Colombo has eight operational shopping malls with leasable areas varying from 0,000-50,000 sq ft (Figure 11). The concept of anchors is still in its nascent stage, and in most cases it is a supermarket or a mini-major occupying about 3-20% of the mall area. At end-2011, the total stock of these operational malls stood at 647,000 sq ft with an average vacancy rate of 3-8%. In addition to the existing eight malls, three more are in their planning stage and will add another 1.05 million sq ft of retail space to the Colombo retail stock by 015. Figure 11: Shopping Malls in Colombo Shopping Mall
Liberty Plaza Unity Plaza Majestic City Crescat Boulevard Realty Plaza Dutch Hospital Courtyard
Location
Duplication Road, Kolupittiya Galle Road, Bambalapitiya Galle Road, Bambalapittiya Cinammon Grand, Galle Road ColomboNegombo Road, Ja-Ela Bank of Ceylon Mawatha, Fort
Developer
Colombo Land ON ALLY Holdings CT Properties John Keells Ceylinco International Realty Group UDA
Major Tenants
Keells Super, Abans, Sony, Premasiri, Labelswine, Bata, Perfumerie, Lakehouse Bookshop, DSI City Opticals, Network Communication, PC Electronics, Leader, Photo Micro ODEL, Hameedias, Triumph, DSI, KFC, Food City, Majestic Cinemas, Wonderworld Hameedias, Triumph, Levis, Reebok, Adidas, E-Mart, Keels Super, Perfumerie ODEL, Cinemax Cinemas LUV SL, Colombo Jewellery, SPA Ceylon, Crab Ministry, Heladiv Tea Club, WIP Bar, Barefoot
Occupancy
89% 100% 9% 100% 88% 100%
Rents
K-Zone
Character
Prime High Street of Colombo with a mix of commercial and hospitality activity Caters to local market with highest density of organised retail in Colombo
Consumer Profile
High and middleincome group, tourists Middle and lowIncome group
Major Retailers
McDonalds, KFC, Barefoot, Shirt Works, ODEL, Abans Glitz, No Limit, DSI, Arpico, Food City, K Zone Fashion Bug, Liberty Plaza, Mercedes, Softlogic, Singer McDonalds, Coffee Bean, Pizza Hut, Barista, Arpico, Keells Super, Food City Food City, Arpico, Keells Super
High and middlePrime High Street of Colombo with a mix of Income group, commercial, entertainment and institutional space tourists Upcoming retail area (mini-majors) Traditional retail area of Colombo High and middleincome group, tourists Middle and lowincome group
Format Types
Food City, Food City Express, Food Big City, Cargills Warehouse Keells Super, Elephant House, Beema Best Buy City Co Op Laughs Sun Up Departmental Store Premasiri Supermarket, Premasiri Mini Market Arpico Super Center, Arpico Super Store
Majestic City
Category
Lifestyle Lifestyle/Electronics Electronics Lifestyle Lifestyle Lifestyle Lifestyle Lifestyle Lifestyle Lifestyle
the upcoming suburbs of Rajagiriya and Sri Jayawardenepura Kotte. These include such as Parliament 110, Fairway Sky Garden and Centrium amongst others. Units are available from LKR 10-25 million and the segment has a share of 26% in the supply of condominiums (Figure 15). Premium Segment: This is the most popular segment within the city limits of Colombo and is primarily in close vicinity to the CBD area, with pricing in the range of LKR 25-45 million per unit (Figure 15). Specifications are superior with large unit sizes ranging between 1,250-1,800 sq ft. Most projects in this category have been completed, apart from On Three20 at Union Place and Havelock City. Luxury Segment: The luxury segment consists primarily of already established projects with resale values of more than LKR 45 million per unit (Figure 15). The Emperor at Galle Road and a few units from premium segment projects qualify for this categorisation based primarily on their larger floor area (above 1,800 sq ft). Ultra Luxury Segment: Colombo doesnt have any projects with average unit value above LKR 60 million, although every project in the premium and luxury segments has a few units of the ultra-luxury segment with considerably higher specifications, furnishings and larger floor area. In most projects, these units are either penthouses or higher floor duplex units with private terraces etc.
Location
Galle Road, Colombo 0 Galle Road, Colombo Galle Road, Colombo 0 Colombo 0
Developer
Asian Hotels ICC Housing Asian Hotels CT Properties
Current Current Current Sales (LKR per Unit) (LKR per sq ft) (USD per sq ft) (Launch Year)
48,000,000 ,100 26,400 26,200 ,900 0,800 ,700 32,400 17,800 15,800 14,900 15,600 16,300 16,400 50 00 00 180 165 170 50 150 10 10 10 140 140 100% (008) 100% (007) 100% (2006) 100% (007) 55% (010) 75% (011) 100% (007) 90% (008) 100% (007) 100% (007) 100% (008) 15% (011) 1% (011)
Luxury Segment Premium Segment ,000,000 34,000,000 43,000,000 26,000,000 5,000,000 34,000,000 Mid-Level Segment Borella, Colombo 08 Rajagiriya Kotuwegoda, Rajagiriya 110, Parliament Road Rajagiriya Trillium Residencies The 000 Plaza Fairway Residencies Fairway Residencies Atlantis (ANPG Group) Fairway Residencies 24,000,000 19,000,000 26,000,000 5,000,000 ,000,000 7,000,000 000 Plaza Residences Thalapathpitiya
Havelock Road, Colombo Mireka Capital Land Union Place, Colombo 02 John Keells Galle Road, Colombo 0 Asian Hotels
Source: Jones Lang LaSalle, 4Q11 Note: 1 USD = LKR 109.76 (Average during 2011)
Figure 16: Average Capital Values and Absorption Levels by Segments (2011)
60,000 50,000 40,000 Value 0,000 0,000 10,000 0 Luxury Segment Avg Unit Value ('000 LKR / Unit) Avg Capital Value (LKR / sq ft) Average Absorption (%) Source: Jones Lang LaSalle, 4Q11 48,000 ,100 96% Premium Segment 28,663 ,9 75% Mid-Level Segment 19,955 14,008 57% Lower MidLevel Segment 10,000 10,500 77% 10% 100% 80% 60% 40% 0% 0% Average Abosprption
1800 1600 1400 100 1000 800 600 400 00 0 005 2006 007 008 009 010 011 01F .7% 5.5% 7.5% 14.5% 62.6% 59.7%
7% 64% 56% 48% 40% % 1.% 24% 16% 8% 0% Absorption Rate
Absorption Rate
Figure 17: Supply & Absorption Trends in Colombo Condominium Market Year
Yearly Supply (Units) Cumulative Supply (Units) Yearly Absorption (Units) Cumulative Absorption (Units) Cumulative Absorption (%) Unsold Stock Available Stock Absorption Rate
2005
184 184 85 85 46% 99
2006
1,498 1,682 1000 1,085 65% 597 1,597
2007
1,547 ,8 180 2,365 7% 864 2,144
2008
1,1 4,351 670 ,05 70% 1,17 1,987
2009
1,433 5,785 700 ,75 65% ,050 ,750
2010
1,402 7,187 950 4,685 65% ,50 3,452
2011
942 8,19 500 5,185 64% 2,944 3,444
2012F
1,00 9,429 900 6,085 65% 3,344 4,244 1.%
Source: Jones Lang LaSalle, Condominium Management Authority Colombo (2012) Note: Available Stock is the sum of Unsold Stock at the end of previous year and Yearly Supply in the current year. Absorption Rate for a particular year is the ratio of Yearly Absorption to Available Stock, implying the rate at which the unsold inventory is selling.
The supply share categorisation (20052011) reveals that the highest supply was in the lower mid-level segment (units below LKR 10 million) at 35%, followed by the premium segment (LKR 2545 million per unit) at 34%. The supply share categorisation for 2012-2015 based on historical absorption trends is envisaged to be the highest in the lower mid-level segment at 42% followed by the mid-level segment (LKR 1025 million per unit) at 28%. Colombo is witnessing a strong demand in the premium housing segment, driven by High Networth individuals (HNIs) and Non-resident Sri Lankans. Colombo city has seen a supply of more than 1,500 high-end condominiums in a price range of USD 180220 per sq ft, of which more than 70% has been sold. The demand for premium segment housing is expected to be sustained over the medium term. The projected shortage of housing units has encouraged developers to start developing or expanding their residential project portfolios in Colombo. Political and economic stability, coupled with an increased thrust towards the establishment of a service-based economy, are envisaged as the drivers of future demand.
Victoria Towers
Established micro-markets offer nearly 4% yield, which may go up to 7% in premium locations. Apartments are rented to expatriates and corporate houses on short-term leases of one to three years as well as long-term leases of five years depending upon the profile of tenants. Completed projects such as The Emperor, Empire Residencies, Iceland Residencies, and Crescat Residencies quote rents in the range of LKR 250,000-350,000 per month for a threeBHK apartment. Restrictions on Foreign Investors Foreign investors are liable to pay a tax of 100% of the value of the property for buying apartments below the fourth floor (including landed properties) in Sri Lanka. While the restriction is not applicable on apartments above the fourth floor, certain property developers, with the approval of the Board of Investment of Sri Lanka (BOI), have obtained concessions for foreign investors to invest in apartments below the fourth level (including landed properties) without paying additional tax. A company incorporated in Sri Lanka with less than 5% foreign participation in equity is also exempt from the above.
5,000 4,500 4,000 Workers' Remittances (in USD million) ,500 ,000 ,500 ,000 1,500 1,87 1,414 1,000 500 001 00 00 2004 005 2006 007 008 009 1,165 1,564 15.8% ,0 16.6% 14.1% 22.6%
23.6%
5%
10.5% 9.9%
10.6% 1,918
1.7% 2,161
Workers' Remittances Source: Central Bank of Sri Lanka Notes: 2010a Provisional figures
Annual Change
Engineering Services, Housing and Common Amenities (MCEHC), nearly 54% of the population of Colombo lives in huts or slums. Sri Lankas high-rise low income housing programme - Relocation of Underserved Settlements - which began in 2001 with the construction of the Sahaspura project, has already completed the construction of nearly 1,000 units in the last decade. The government has announced an ambitious plan to construct 5,000 houses during 2012-2014 for the re-housing of slum dwellers. Private players, both domestic and foreign, can participate in the low-income relocation housing programs. Figure 20: Growth in Per Capita Income (At Current Market Prices)
4,500 4,018 4,000 Per Capita Income (in USD) ,500 ,000 ,99 2,600 2,736 ,500 ,000 1,421 1,617 1,500 1,241 1,000 500 CAGR 14% (005-010) 2,014 ,057 CAGR 11% (010-015) ,119 3,556
Source: Department of Census and Statistics, Central Bank of Sri Lanka and Jones Lang LaSalle 009a: Revised; 010b: Provisional; 011e: Estimated; 01F-015F: Forecast
15.5 14.98 14.80 14.21 14.25 14.11 1.71 1.71 1.7 13.74 1.70 14.0 13.62 13.60 13.47 13.44 1.5 1.0 1.5 1.0 15.0 14.5
15.5
0.09.010
1.10.010
0.11.010
1.1.010
1.01.011
8.0.011
1.0.011
9.04.2011
1.05.011
0.06.2011
9.07.011
0.08.011
0.09.011
1.10.011
0.11.011
0.1.011
The Emperor
,500,000
80%
1,078,719
1,500,000 855,905
40%
654,477
JLL ESTIMATE
500,640
549,310
559,600
0%
494,010
438,470
566,200
500,000
0%
447,890
-0%
01F
014F
015F
Tourist Arrivals
% Y-o-Y Change
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
16
Economic Impact 2012: Sri Lanka by World Travel and Tourism Council
016F
01e
00
2006
000
001
00
2004
005
007
008
009
010
011
Number
256 50 181 679 49
Number of Rooms
14,948 577 560 6,393 57 22,735
With a target of 2.5 million tourist arrivals by 2016, nearly 4,500 5,100 annual incremental supply of hotel rooms will be required in the next five years. With an average of 60 rooms per hotel17, the supply of hotels needed every year for the next five years to meet the demand is 75-85 hotels or nearly 3.5-4.0 million sq ft of hotel space (Figure 24). Figure 24: Estimated Number of Additional Hotel Rooms Required Hotel Rooms Required Annual Incremental Supply Required
Hotel Estimated Area Hotels Rooms (million sq ft) Government of Sri Lanka Target (2012-2016)^ ,500 0,500 5,000 4,500 5,08 5,000 75 85 8 3.6 4.1 4.0
Source: Tourism Development Strategy 2011-2016, Ministry of Economic Development, Government of Sri Lanka
Source: ^Tourism Development Strategy 2011-2016, Ministry of Economic Development, Government of Sri Lanka (011) # A New Realty: Dissolving Borders Through Cross-Border Integration, E&Y and FICCI (2011) *Jones Lang LaSalle
Cinnamon Lakeside
17
As per SLTDA, in 2010 there were 242 hotels with a total of 14,461 hotel rooms, implying an average of 60 hotel rooms per hotel.
2002
56.4 42.8 8.0 44.8 36.3 42.4 43.1
2003
68.7 48.9 48.3 51.1 44.3 54.0 5.
2004
75.5 5.9 52.6 44.2 52.4 60.4 59.
2005
76.3 44.8 1.5 9.1 36.6 9.5 45.4
2006
64.3 48.0 41.2 16.9 9.9 43.3 47.8
2007
63.9 49.3 47.6 18.0 41.2 40.3 46.2
2008
57.1 52.6 46.1 21.6 34.2 5. 43.9
2009
57.8 5.7 49.6 7.8 42.2 44.4 48.4
2010
78. 75.1 71.9 70.0 63.5 62.6 70.1
Source: Annual Statistical Report of Sri Lanka Tourism 2010 (SLTDA) Notes: Major Cities in Each Region - Greater Colombo: Colombo, Gampaha and Kalutara | South Coast: Galle | East Coast: Trincomalee and Batticaloa | High Country: Badulla and Bandarawela | Ancient Cities: Kandy, Anuradhapura, Habarana and Polonnaruwa
Location
Colombo Colombo Kalkudah Hambantota Kuchchaveli Ahungalla, Meeraladuaa Kalpitiya Kalpitiya
Acres
10 6 NA 145 0 7.5 190 80
Investment (LKR)
USD 500 million (LKR 65 billion) for 99 year lease of land and construction USD 125 million (LKR 13.7 billion) for 99 year lease of land and USD 300 million (LKR 32.9 billion) for construction USD 360 million (LKR 39.5 billion) for acquiring land and construction USD 126 million (LKR 13.7 billion) for 99 year lease of land and construction USD 100 million (LKR 11.0 billion) for 99 year lease of land and construction USD 45 million (LKR 4.9 billion) for acquiring land and construction USD 127,500 (LKR 14 million) for 5 year lease of land and USD 15.5 million (LKR 1.7 billion) for construction USD 34,000 (LKR 3.7 million) for 5 year lease of land and USD 11 million (LKR 1.2 billion) for construction
Year
011 01 010 011 011 010 010 010
Investor
Shangri La ITC Karooda Group Shangri La
Investor Origin
Hong Kong India Switzerland Hong Kong
Mfar Hotels (Cochin) (Dr P Mohammed Oman Ali) Six Senses Resorts and Aitken Spence Qube Lanka Leisure Sun Resort Investment Thailand and Sri Lanka India Maldives, Sri Lanka and Switzerland
Source: Industry and Media Sources, Jones Lang LaSalle Notes: 1 USD = 109.76 LKR (Average During 2011)
The Next Decade: Top Trends to watch for in Colombos Real Estate
Leapfrogging: Integrated Developments at Suburban Locations
Land prices in Colombo have appreciated rapidly in the last four years. With prime land parcels in the CBD (Colombo 01 and 02) being offered at LKR 8-9 million per perch18 (USD 268-301 per sq ft), construction of offices in the core of the city will imply a high rental expectation. Land in SBD locations is also expensive, and is available at LKR 4-5 million per perch (USD 134167 per sq ft). Leapfrogging is the phenomenon of developing real estate at locations further away from the city, where land prices are still cheap despite the on-going improvements in infrastructural connectivity. To increase financial attractiveness for outsourcing, developers and government should explore the development of integrated IT parks with office, retail and residential developments in these suburban locations. These compact developments with walk-to-work concepts are also sustainable as they bring the workforce closer to their offices.
18
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Office Market in Colombo: An Empirical Analysis by RG Ariyawansa and UGM Dilhani, Sri Lankan Journal of Real Estate (2009)
Authors
Himadri Mayank Assistant Vice President, Research and REIS himadri.mayank@ap.jll.com +91 99756 12304 Robin S Assistant Manager, Strategic Consulting robin.s@ap.jll.com +91 87544 04800
Advisors
Ashutosh Limaye Head, Research and REIS ashutosh.limaye@ap.jll.com +91 98211 07054 Simon Thomas Assistant Vice President, Strategic Consulting simon.thomas@ap.jll.com +91 98400 68451
Special Contributors
Gagan Singh Chairperson, Sri Lanka Operations gagan.singh@ap.jll.com +94 777 444094 +91 98111 51610
Shankar Arumugham Senior Vice President, Strategic Consulting shankar.arumugham@ap.jll.com +94 776326888 +91 99400 66869
K-Zone
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