Colombo Property Market Monitor 2Q22

In 2022, Sri Lanka’s economy is forecasted to contract by 7.6% due to the multifaceted economic challenges. The industrial sector notably plummeted during 1Q22, largely because of the constrained supply of electricity and fuel. Exchange rate depreciation substantially impacted economic activity, affecting the real estate market as well. However, easing challenges in the external sector signalled an optimistic prognosis for the medium term. Colombo’s commercial real estate market maintained its growth momentum, with demand pivoting towards high-end office spaces in CBD. Despite surging prices, the residential market continued to swell during 2Q22. Additionally, the retail market is anticipated to witness new developments amidst inconsistent performance across the industry. Logistics and industrial sector rentals spiralled to a historical high, albeit with muted leasing activity.
 

Key highlights:

• Economic activity partly contracted due to supply-side constraints

• Heightened leasing activity observed in high-end Grade A buildings within CBD

• Macroeconomic conditions coupled with scanty supply strengthened the residential market demand

• Retail industry performance remained challenged with moderate leasing activity

• Industrial and logistics rentals elevated predominantly driven by the exchange rate depreciation