Enquiries maintain momentum, despite slow pace of transactions

• During 4Q22, Colombo’s industrial and logistics sector saw robust infrastructural developments. The west container terminal dredging at Colombo Port, the best-performing port in South Asia, began with an investment of about USD 700 million.
• Despite the slow transaction pace during 4Q22, occupiers continued to explore Grade A warehousing opportunities due to the world-class quality of properties. However, the Grade B and below market witnessed significant transactions and continued to maintain its pace.

Noteworthy developments outside Greater Colombo

• No new Grade A supply was completed or announced within the Greater Colombo market. Further, construction activities were partly hampered as the industry struggled with multi-faceted challenges, from sourcing capital to raw materials.
• However, the Hambanthota Port and the adjacent industrial park saw remarkable growing industrial activity. A plug-and-play industrial facility and several other bonded warehousing facilities are nearing completion and poised to lure sizable investments in the short term.

Rents remain still across segments

• Average Grade A rentals across the Greater Colombo market, quoted in USD, remained stagnant at LKR 181.5 per sqm per month throughout 4Q22, following a period of drastic changes in external headwinds. Similarly, Grade B rents have also remained largely static q-o-q at LKR 72.5 per sqm per month.
• On the contrary, Grade A warehouse rentals saw resounding growth of about 126.9% compared to that of the same time the previous year, predominantly driven by costs and exchange rate volatility.

Outlook: Elevated supply to reach the Ja Ela-Katunayake corridor

• Occupier activity will likely pick up momentum in the medium term as the logistics industry has taken centre stage among the investments underpinned by the Government of Sri Lanka’s incentivised policies, brought on by the 2023 budget proposal.
• Despite challenges faced, the Ja Ela-Katunayake corridor expects an increased supply of around 400,000 sq ft of Grade A facilities to be completed in 1Q23.