APPD Market Report Article

Colombo

August 26, 2022

Dr Samantak Das, Head of Research, India & Sri Lanka

23%

LKR 125

Rents
Rising

Warehouse leasing demand remains subdued

  • The Port of Colombo, Sri Lanka, recorded an all-time high throughput of 7.25 million TEU (twenty-foot equivalent unit) in 2021 and a growth of 2% y-o-y in the cargo handled during the first five months of 2022.
  • Grade A industrial warehouse leasing market activity remained muted during 2Q22, largely due to the uncertainty brought on by the economic imbalances within the country.

Supply to increase outside Greater Colombo

  • In 2Q22, no new Grade A supply was added to the Greater Colombo market. However, the largest warehousing facility for dry bulk cargo inside a port was reported to come up at the Hambanthota International Port (HIP), outside Greater Colombo. The facility will be built on an area of about 186,000 sq ft.
  • Due to minimal leasing activity, as well as self-owned facilities, vacancy rates remained stable across the market during 2Q22.

Upward pressure on rents to reflect heightened costs

  • Average Grade A rents climbed to LKR 125 during 2Q22, driven by exchange rate depreciation and the heightened cost of construction. There was a growth of 23.7% q-o-q and 61.29% y-o-y in rental prices.
  • Developers have started to pivot their pricing strategies by giving quotes in USD, due to the constant depreciation of the LKR against the USD. This has substantially contributed to the elevation of prices in the market.

Outlook: Anticipation of supply in established corridors in 3Q22

  • 500,000 sq ft of premium Grade A supply is projected to be added to the Greater Colombo market in 3Q22.
  • Increased traction is anticipated outside the Greater Colombo area as the Government of Sri Lanka plans to develop Trincomalee Harbour as an industrial hub. The adjacent land will likely be leased to industries along with the port development.

Note: Greater Colombo Logistics & Industrial refers to the Greater Colombo prime logistics market.

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