Sri Lanka Scaling New Heights

Sri Lanka Scaling New Heights
Tracking Real Developments Across Real Estate

August 2014
Sri Lanka - Scaling New Heights
Strong fundamentals reignite high growth
After a brief slowdown in 2012 due to external uncertainties, the USD 59 billion Sri Lankan economy bounced back during 2013. Supported by
increased domestic demand and improved exports and tourism, the GDP growth accelerated to 7.3% in 2013 from 6.3% in 2012. Furthermore,
strong economic fundamentals, including a vibrant financial services sector and the ease of doing business in the country, aided the quick
recovery. In addition, the high human development index in the country1 will continue to catalyse Sri Lankas economic growth.
To improve productivity in the long term and have stable economic progress, Sri Lanka is proactively investing in various infrastructural projects,
from improving transport networks to telecommunications and electricity generation. This has resulted in the construction sector steadily
increasing its stake in the Sri Lankan GDP from 7.6% in 2009 to 10.3% in 2013.
Sri Lanka GDP by Sector

10000
9.0%
in LKR Billions
9.4%
7.8%
6000
4000
6.3%
7.6%
7.3%
7.0%
5.0%
4.0%
3.5%
2009
3.0%
2010
2011
2012
2013
Services
8.0%
6.0%
7.6%
2000
0
10.3%
Industry (excl Const.)

GDP Growth
8.2%
8.0%
8000
Agriculture
Construction
GDP Growth
2.0%
Figure 1: GDP by sector, Source: CBSL
Note 1 - Sri Lanka ranks as a high human development country, according to the Human Development Report 2013
Colombo, the largest city and the commercial capital of Sri Lanka, is at the forefront of infrastructure activity in the country. Some of the key
infrastructure projects that were completed recently or are under development in and around Colombo include:
The 25.8 km long

Colombo-Katunayake Expressway
from the New Kelani Bridge to
Katunayake at a project cost of around
USD 292 million.
As part of the
Colombo Port expansion project,
the south container terminal was
completed in 2013 and the east
container Terminal is expected
to be completed in 2014.
Phase I of the 29.2 km

long Outer Circular Highway
completed in early 2014. This fourlane highway passes through Colombo
and Gampaha and has a provision for
future expansion to six lanes. Phase II
and Phase III are likely to commence
operations in 2016 and 2017,
respectively.
The Beira Lake

Several other projects
restoration project consists
including the York Street
of diverting the sewerage network
facelift, the Fort Railway Station
around Beira Lake and relocating
modernisation, the Marine Drive
unauthorised housing. This project will
expansion, as well as the mass transit
not only increase the scenic beauty of the
systems such as metro rail and
lake, but is also expected to increase
The Bandaranaike
monorail are proposed, thereby
the potential benefits to the city in
International Airport
quietly enhancing real estate
the areas of water transport,
expansion project is underway
values within the city.
recreation and sports.
to expand the capacity for arrivals and
departures. By the year 2017, 8 gates, 14
aerobridges, an aircraft parking apron and
a taxiway, as well as the modernisation of
utilities such as water supply, electricity
and waste water disposal are
scheduled to be completed.
Since 2009, improved confidence in the investment market has triggered an escalation in property values. Apart from infrastructure projects, an
increased migration towards Colombo2 (both from the rural areas and outside the country) and a desire to own a property in the city are raising
real estate values.
The interest in acquiring land within the central and secondary submarkets has increased steadily due to limited availablity of land in the city.
In the first half of 2014, Colombo witnessed around 5% increase in land prices on an average, while select locations within the central and
secondary submarkets saw faster growth in land prices at around 7-8% since end of 2013.
LKR Mn per Perch
Submarkets
USD per sq ft
Central - Colombo 1, 2, 3
Min
5.5
Max
12.5
Min
155
Max
353
Secondary - Colombo 4,5, 6,7, 8, 9, 10
2.0
9.0
57
254
Secondary North - Colombo 11, 12, 13, 14, 15
0.7
10.0
20
283
4.0
113
Suburbs - Rajagiriya, Dehiwala, Nugegoda, Moratuwa, Wattala, Peliyagoda, Kiribathgoda and their
neighbouring locations
Figure 2: Land Prices, Source: JLL Research, 2014, Note: One perch = 272.25 sq ft, Land prices are subject to various factors including land size, road width etc.
Minimum land rate in suburbs submarket can vary and are highly subjective.
Floor Area Ratio

Land Extent
(sq mt)
150-250
< 12.2
1:2.5
150-250
12.2
1:3.0
250-400
12.2
1:3.5
400-500
12.2
1:4.5
500-700
12.2
1:5.0
500-700
15.0
1:5.5
700-900
15.0
1:6.0
900-1,000
15.0
1:7.0
900-1,000
22.0
1:7.5
1,000-1,500
Wattala
Max.
Min Road
permissible
Width (m)
FAR
22.0
1:8.0
1,500-2,000
22.0
1:9.0
1,500-2,000
24.0
1:9.5
2,000-2,500
24.0
1:10.0
2,500-3,000
24.0
1:12.0
3,000 and above
24.0
Unlimited
Figure 3: Floor Area Ratio, Source: City of Colombo

Development Plan - 2008, Note 2 - Refer to Figure 14
15
Colombo 15
Colombo 13
14
Colombo 11 13
Colombo 14
01
11
Colombo 01
02
12
Colombo 12
10
Colombo 02
09
Colombo 09
Colombo 10 08
07
03
Peliyagoda
Colombo 08
Colombo 07
Colombo 03
04
05
Colombo 05
Colombo 04
Rajagiriya
Malabe
Sri Jayawardenepura
Kotte
06
Colombo 06
Nugegoda
Figure 4: Colombo Map,

Source: JLL Research
Dehiwala - Mount Lavinia

Colombo residential market - The investors home
Despite an attractive floor area ratio (FAR) regime, increasing construction costs for high-rise buildings and high borrowing costs have led to
apartment prices being unaffordable. As a result, the apartment market is largely restricted to only high-income-earning resident Sri Lankans
(RSLs), non-RSLs (NRSLs) and foreigners.
Apartment cost in different submarkets in Colombo:
Price Range - LKR/Sq ft (USD/Sq ft)
Luxury
Upper-Mid
Lower-Mid
Affordable
Central
35,000-45,000 (269-346)
26,000-35,000 (200-269)
N/A
N/A
Secondary
30,000-50,000 (230-384)
22,000-30,000 (169-230)
12,000-22,000 (92-169)
N/A
Secondary
North
N/A
18,000-28,000 (138-215)
12,000-18,000 (92-138)
Less than 12,000 (92)
Suburbs
N/A
16,000-25,000 (123-192)
12,000-16,000 (92-123)
Less than 12,000 (92)
Sub-Markets
Figure 5: Apartment cost, Source: JLL Research
Interest Rates on Lending for housing purpose (%)
2012
2013
1H14
National Savings Bank
14.0-15.5
14.0-15.5
13.5-14.5
State Mortgage and Investment Bank
17.0-19.0
12.7-17.5
13.0-13.5
7.5
6.5
6.5
Benchmark Interest rate
Figure 6: Interest rate on Housing loans, Source: Annual Report 2013, CBSL and JLL Research
Developers target the NRSL community

High project construction costs limit margin for developers to build affordable housing projects. Therefore, private developers concentrate on
high-margin luxury and upper-mid projects within the city. Moreover, as NRSLs and foreigners are investing in the country with an increased
interest, the demand for such high-end products is on the rise.
In addition, the preference of foreigners, NRSLs and high-net-worth (HNW) RSLs to stay close to the CBD has supported the demand for
luxury residences. Sri Lankans who have been living abroad have started to return since the end of the civil war, and this wealthy section of the
population demands luxury/upper-mid segment residences.
It is important to mention that workers

remittances from abroad have become
a steady and reliable source of income
for Sri Lanka. Workers remittance grew
by 7.1%, from USD 5.9 billion in 2012 to
USD 6.4 billion in 2013. According to the
Sri Lanka Bureau of Foreign Employment,
more than 4.2 million workers departed
for foreign employment between 1990 and
2012. Considering the reverse migration,
we estimate that at least 2.5 million Sri
Lankans currently work abroad and along
with those who have returned to the
country, form the prime target for selling
residential properties in Colombo.
7,000
Workers Remittances (USD Million)
6,000
5,000
4,000
3,000
2,000
1,000
0
2009
2010
Middle East
Europe
2011
Rest of Asia
2012
Americas
2013
Others
Figure 7: Workers Remittances, Source: CBSL Annual Report
Investing in the Sri Lankan residential real estate market

Apart from the NRSL community, foreign individuals and institutions are showing an increased interest in the Sri Lankan real estate market.
However, foreigners cannot purchase land in Sri Lanka, but they can purchase an apartment that is on or above the fourth floor. This rule
restricts foreigners to gain 100% access to the land.
Investment in Residential Real Estate
By Foreigners
By Citizens
Individuals / Institutions
No restriction to invest in Land / Condominiums
Freehold
Investment
in land is
prohibited
Investment in Condominium is
allowed only in apartments that
are on or above Fourth floor
Figure 8: Investing in Sri Lankan Residential Market, Source: JLL Research

8
Leasehold
Individuals /
Institutions can lease
Land up to 99 years
Rate of Construction Progress = Sales Velocity rule is universal

Given the limited market for upper-mid and luxury projects, around
3,300 luxury and upper-mid units have been supplied since 2005.
Similar to other emerging markets, Colombo also records higher sales
velocity in projects that are close to completion. Of the 3,300 units,
only 1,450 units were completed, and 98% of completed units have
been sold; whilst only 57% have been sold in the projects that are
under construction. Therefore, developers are required to speed up
construction to clear unsold inventories.
Some of the prominent projects that are under development in the luxury and upper-mid segments include:
Project Name
Location
Developer
Completion Year
Total Units
Quoted rate (USD/sqft)
Destiny Residency
Slave Island
Imperial Builder
2017
205
> 231
7th Sense
Colombo 07
John Keells
2015
65
> 385
The Elements
Rajagiriya
Fairway Holdings
2016
132
> 154
Belvedere
Kotahena
Keppel CT Developments Ltd
2018
260
> 280
Altair
Beira Lake
South City Projects
2017
224
> 326
110 Parliament Road
Rajagiriya
Apurva Natvar Parikh group
2014
188
> 180
Figure 9: Prominent residential projects in Colombo that are under development, Source: JLL Research
Although we foresee the reverse migration trend and investments

by NRSLs and foreigners continuing, the market for the luxury and
upper-mid segment housing is limited. Hence, we expect not more
than 500 housing units in this segment to be absorbed annually for

the next three years, with a high level of absorption in the ready-tooccupy and near-completion projects.
Some of the proposed projects in the luxury and upper-mid segments:

Project Name
Location
Developer
Completion Year
Total Units
Quoted rate (USD/sqft)
Glennie Street
John Keells
2018
231
> 330
Duplication Road
AVIC
2018
350
> 260
Colombo City Centre
Beira Lake
Silver Needle - Abans
2018
182
TBA
Shangri-La
Galle Face
Shangri-La
2019
TBA
TBA
Waterfront
Astoria
Figure 10: Prominent upcoming residential projects in Colombo, Source: JLL Research
How affordable is Colombo?

High project development costs coupled with the high borrowing costs for housing loans have breached affordable limits and restricted the home
buying prospects for Sri Lanka. Based on our understanding from the affordability assessment, only the top-income-earning resident Sri Lankans
can buy homes in Colombo. Residents with limited income are forced to opt for properties that are at least 20-25 km away from the city limits.
Majority of the apartment projects in the central and secondary submarkets rely only on investments from HNW RSLs, NRSLs and foreigners.
Assumptions and methodology
Affordability is calculated based on the house price to annual income ratio. If the ratio is less than 5:1, then the property is affordable. The
income segmentation for urban locations classified by the Income and Expenditure Survey 20122013 is taken as a proxy for Colombos
income segment.
Inference from the affordability assessment
Only the top 20% of income-earning households, i.e., 17.1% of
the resident population in Colombo, can afford to buy their dream
homes in Colombo or its suburbs.
Only the top 10% income-earning households, i.e., 8.7% of the
resident population in Colombo, can buy a two-bedroom or
three-bedroom apartment in Colombo.
Mean Monthly Income based

on the income deciles (from
Income and Expenditure
Survey 2012-13) (A)
Even the top 10% of households with a mean monthly income of

around LKR 0.3 million can only afford a two-bedroom lower-mid
property in secondary locations.
Being relatively affordable, the secondary north submarket
offers the top 10% income-earning households the option to buy
an affordable three-bedroom apartment.
B/(A*12) - Affordability ratio - If the ratio is less than

five, then the house in that particular sub-market and
segment is affordable for a particular income group,
if the ratio is greater than five then the house is not
affordable for that particular income group
Even in suburban locations, the top 10% of income-earning

households may not be able to purchase a two-bedroom uppermid apartment.
Therefore, apartments in the Central submarket and upper-mid
and luxury projects in the secondary submarket rely only on
NRSLs, foreigners or HNW RSLs in Colombo.
Segmentation of households
based on Income in deciles
Central
L
Figure 11: Methodology, Source: JLL Research
Secondary
UM
Ticket sizes of the

different type of apartments
across segments and submarkets (B)
UM
Secondary - North
LM
UM
LM
Suburbs
UM
LM
3BHK+
2BHK
1BHK
Third top 10% Households 3BHK+
with a mean montly
2BHK
income of LKR 71,490
1BHK
Second top 10% Households 3BHK+
with a mean montly income 2BHK
of LKR 100,302
1BHK
3BHK+
Top 10% households
with an mean monthly
2BHK
income of LKR 285,803
1BHK
Bottom 70% with
monthly income less
than LKR 63,334
Legend:
Affordable
Figure 12: Affordability Heat map, Source: JLL Research
10 Sri Lanka - Scaling New Heights
Not Affordable
A - Affordable
L - Luxury
UM - Upper-Mid
LM - Lower-Mid
Housing the masses - The government takes charge
UDA partners with private developers
The socioeconomic condition of the lower-income segment of the
To boost the affordable housing sector and elevate the living
country has been improving with various poverty alleviation pro-
standards of people residing in slums or in unhygienic conditions,
grammes. The latest Household Income and Expenditure Survey
the Urban Development Authority (UDA) introduced the Urban
reveals that the household income per month in Sri Lanka has been
Regeneration Project (URP). The UDA plans to eradicate slums
growing at a compounded annual growth rate (CAGR) of 6.1%, from
and other dilapidated housing from the city by resettling the families
LKR 36,451 per month in 2009-2010 to LKR 46,207 in 2012-2013.
to new housing colonies of internationally recognised standards.
More importantly, rapid economic expansion has trickled down sig-
Consequently, the UDA has started its mission to construct around
nificantly, and the poverty headcount ratio has declined rapidly during
30,000 low-cost housing units in Phase I of the URP. In addition, once
the past decade. With the emergence of the IT/ITES and tourism sec-
Phase I is completed, the UDA plans to construct another 40,000
tors, job opportunities in Colombo are increasing. As a result, we are
housing units.
witnessing heavy migration towards Colombo, which requires proper

housing facilities. The government has taken on the duty to provide
housing and a healthy lifestyle to every citizen. Subsequently, while
the private players concentrate on the demand for housing by NRSLs
and foreigners, the government has been focusing on the affordable
and lower-mid segments.
Meanwhile, through the URP, the government has already built

around 4,000 apartments. In addition, another 3,000 apartments
are under development for the low-income segment of Colombo.
Moreover, with the UDA partnering with Tata Housing from India to
speed up the construction of affordable residences, we foresee similar
arrangements with other private players to achieve the targeted
completion of 70,000 housing units in the next five years.
Sri Lankan GDP by Sector
40,000
19.0
30,000
20
36,451
26,286
15.2
20,048
20,000
8.9
12,803
6.7
10,000
0
2002
25
46,207
22.7
2005
2006-07
Mean household income per month
2009-10
2012-13
Poverty Headcount ratio
Household income/ month (LKR)
50,000
15
Population (Mn)
2009
2012
% Change
10
Sri Lanka
19.7
20.2
3%
Urban
2.8
3.6
29%
Rural
15.8
15.7
-1%
Estate
1.1
0.9
-18%
5
0
Poverty Head count ratio
Figure 13: Household Income and Poverty ratio, Source: Income and Expenditure Survey, 2012-2013
Figure 14: Population growth, Source: Income and

Expenditure Survey, 2012-2013
Sri Lanka - Scaling New Heights 11
Office sector in Colombo
Sri Lankas constantly improving socioeconomic development, good infrastructure and availability of talent have attracted many multinational
corporations (MNCs). Furthermore, with Sri Lanka tapping other South Asian countries in terms of starting and doing business with fewer
procedural formalities, we have seen an increase in the number of companies exploring opportunities in the country. As a result, the Colombo
office market is witnessing a steady demand for small-sized office modules that are less than 2,000 sq ft, as these are ideal for start-ups. The
Banking, Financial Services & Insurance (BFSI) and IT/ITES sectors are the top two office leasing sectors in Colombo. While established
domestic BFSI companies absorb office space that is anywhere between 3,000 sq ft and 15,000 sq ft, the IT/ITES sector absorbs office modules
between 10,000 sq ft and 30,000 sq ft WNS, Aegis BPO, Leapset and WSO2 are some of the IT/ITES companies that leased space during the
past year, while Virtusa and HSBC are some of the major office occupiers in Colombo.
Ease of Doing Business (Rank out of 189 countries)
85
95
105
110
130
134
141
164
Sri Lanka
Maldives
Nepal
Pakistan
Bangladesh
India
Bhutan
Afghanistan
Figure 15: Ease of Doing Business, Source: World Bank, 2014
Colombo has around 2.6 million sq ft of Grade A office space, less than 5% of which is vacant. Along with Free Lanka Towers, we expect AEC
Towers to be completed this year, supplying around 0.14 million sq ft of Grade A office space by end of 2014. In 2015, we expect 0.33 million sq
ft to be completed, taking the total stock of Grade A office space to around 3 million sq ft by end of 2015.
Future Supply - Under Construction

Building Name
Address
Developer
GFA sq ft
Year
AEC Towers
Colombo 14
AEC Group
75,000
2014
Orion City Phase II
Colombo 9
St. Anthonys Industries
2,00,000
2015
LHP
Colombo 3
LHP Construction
60,000
2015
Laugfs
Colombo 5
Laugfs Holdings Ltd
65,000
2015
Access towers Phase II
Colombo 2
Access Realties
2,00,000
2016
Waterfront
Colombo 2
John Keells
5,00,000
2018
Shangri-La
Colombo 2
Shangri-La
6,00,000
2018
Figure 16: Future supply, Source: JLL Research, 2014
Limited future supply of quality office space could restrict

business expansion in the long term
The future supply of Grade A office space from the private sector is
largely constrained, with only 0.6 million sq ft expected to come on
stream by 2016. Taking into account the proposed developments,
we arrive at an aggregate future supply of around 4 million sq ft.
This future supply is very low, considering the ambitious targets set
by the Sri Lankan Association of Software and Service Companies
(SLASSCOM) to add another 200,000 jobs by 2022. Even considering
a conservative average floor space per employee of 75 sq ft, Sri
Lanka would require at least 15 million sq ft of office space by 2022
for the IT/ITES sector alone. To address the supply bottleneck in the
coming years, the UDA is developing its second knowledge park,
in Colombos Tripoli market (the first one is under development in
Hambantota), at a cost of around USD 7 million. The knowledge park
is expected to host a range of tenants from various sectors, including
electronics, software, business process outsourcing, fashion design,
pharmaceutical and health.
IT/ITES Revenue (USD Mn)
5000
210
2009A
387
2011A
1000
710
2013A
2016P
Figure 17: IT/ITES Revenue, Source: SLASSCOM
2022P
Apart from office tenants, the park is expected to have centres of the
universities of Moratuwa and Peradeniya. We have been witnessing
foreign universities leasing space in various commercial buildings in
Colombo; we expect this trend to continue in the future, as the number
of students in the country pursuing higher education have been
increasing.
Office sector encroaches on prime residential buildings
Occupiers are increasingly leasing space in refurbished buildings and
choosing to stay closer to the CBD because of minimal vacancy rate
in grade A office spaces. Given the inadequate supply of quality office
space, tenants are compromising and taking up space in residential
structures and Grade B commercial buildings in the CBD to house
their offices. With a steady requirement for small-sized office spaces,
business centres are ideally placed to reap the maximum benefit from
the opportunity of providing small-sized office space modules.
Rents in Grade A buildings have been increasing steadily at a CAGR
of 8% every year since 2009, because of the demand for quality office
space. However, the long-term growth in rents and the expansion
of the office real estate market will rely on the success of the MNC
start-ups and the IT/ITES industry. Although rents have been on the
rise, Colombo still offers a very competitive rate compared to the
commercial capitals of neighbouring countries. Capital values continue
to grow faster than rents, supported by expectations of high rent
growth in the future. As a result, market yields have been compressing
since 2009.
Real estate cost to increase

In the short term, given the low vacancy rate and limited supply, we foresee rents going up. For that reason, it is
an ideal time for tenants of small-sized office space to lock in the rent for future expansion. However, demand for
large-sized office modules has been sluggish, so tenants have relatively more room for negotiation. In the long
term, given the supply constraints, we foresee rents rising irrespective of the size of office modules. Therefore, we
suggest that tenants adopt cost-saving strategies to optimise their real estate costs.
400
Weighted average gross rent (LKR/sq ft/month)
350
336
300
250
211
200
165
150
100
50
0
2009
2010
2011
Average Rent
2012
WTC Rent
2013
1H14
Average Gross Rent (excl. WTC)
Figure 18: Average Rent in Colombo, Source: JLL Research, 2014
Capital Values and Yield

35,000
30,000
7.7%
25,000
20,000
19,398
28,388
7.8%
24,596
21,500
7.6%
7.4%
7.4%
7.2%
7.1%
15,000
6.8%
10,000
5,000
0
8.0%
31,943
7.9%
7.0%
6.8%
6.6%
2009
2010
2011
Weighted Average capital values (LKR/sq ft)
2012
2013
6.4%
Market Yield
Figure 19: Average Capital values in Colombo, Source: JLL Research, 2014
Colombo - A retail destination in the making
As a prime business destination and gateway for tourists, the retail

market in Colombo is growing rapidly. The increasing disposable
income and the rising living standards of Sri Lankans are changing
their spending patterns and preferences towards better quality branded
goods and services.
Colombo has 8 operational malls with a built-up area of around 0.66
million sq ft and has an average vacancy rate of around 5%. Apart from
these malls, the UDA of Colombo is encouraging the conversion of the
citys heritage sites into retail destinations. These include the Dutch
Hospital in the Colombo Fort area, the racecourse complex on Reid
Avenue, the Auditor-Generals Office (Arcade Independence Square) in
the Colombo Fort location and Waters Edge in Rajagiriya. The recently
opened Arcade Independence Square has a good number of retail
outlets for shoppers along with cinemas and restaurants, while Waters
Edge in Rajagiriya will serve as a destination for recreation, dining and
shopping.
Shopping complexes complement inadequate mall supply
Although retail real estate is expanding, growth in the retail real estate
market has not matched the growth of the retail sector. Though Colombo
has a few mall developments, the city lacks international quality mall
space. However, we see a few such proposed developments in the
pipeline, most of which are a part of larger mixed-use developments.
The construction of the retail component is progressing slowly. We
expect only Liberty Plaza Phase II to be completed this year, and
no other new completion is expected in the next three years within
Colombo. However, stand-alone showrooms and supermarkets
continue to expand in the city in the absence of mall supply. Besides
UDAs initiatives to expand retail real estate, local players are also
developing shopping complexes. Orex City, with more than 500
shopping units located in Ja-Ela, Gampaha district, is in a ready-forfit-out stage. Similarly, Ward City, with more than 200 shopping units
located in Gampaha district, is under development.
The organised retail sector outside Colombo is in a primary stage of
development. Kandy City Centre, completed in 2008, is the only mall

outside Colombo. However, with increased interest from supermarket
retailers to expand outside Colombo, we see improved penetration of
the organised retail sector beyond Colombo.
Sri Lankas growing middle class population and strong growth in
tourism will keep retail demand upbeat in the coming years. As was
the case in 2013, older malls/retail space will be refurbished and multi
brand showrooms such as ODEL, House of Fashions, No Limit and
Beverly Street will continue to climb the value chain. Due to the limited
availability of quality retail space along with a strong demand for quality
space, rents will continue to see strong appreciation until the supply
constraints are addressed.
Locations
(Rents LKR per sq ft per month)
Fort (Colombo 01)
150 - 350
Kollupitiya (Colombo 03)
High Streets - 150 - 300, Malls - 300 - 700
Bambalapitiya (Colombo 04)
High Streets - 125 - 250, Malls - 250 - 650
Wellawatte (Colombo 06)
100 - 200
Dehiwala & Mt. Lavinia
100 - 200
Nugegoda
75 - 200
Maharagama
60 - 150
Wattala
100 - 150
Borella (Colombo 08)
> 90
Figure 20: High Street Rents, Source: JLL Research, 2014

Sri Lanka tourism witnessing consistent growth
Since 2009, Sri Lanka has seen a substantial growth in tourist arrivals
and revenues. Sri Lankas foreign tourist arrivals grew at an impressive
27% to a record 1.3 million tourists in 2013 (beating Sri Lankas
previous record of 1 million in 2012) while the country generated USD
1.7 billion in tourism receipts. The Sri Lanka Tourism Development
Authority (SLTDA) has set a target of 1.5 million tourists in 2014 and a
long-term target of 2.5 million annual arrivals in 2016.
According to the World Travel and Tourism Council (WTTC), the
tourism sector directly contributed around 3.9% of Sri Lankas GDP
in 2013 and is estimated to have contributed around 3.5% of the
total employment in the country. Leisure travel spending (inbound
and domestic) generated 84% of direct travel and tourism GDP in
2013 compared to 16% for business travel spending, while travel and
tourism directly supported 286,000 jobs.
The largest source markets for Sri Lanka continues to be India,
with arrivals from the United Kingdom, Maldives, the Middle East
and European countries including Germany and France also being
considerably high. Of late, the country is also recording a significant
increase in Chinese tourist arrivals.
current supply constraints with the country not having sufficient

capacity to cater to large volumes of MICE business. The lack of
frequent flight connectivity to key source markets is another concern.
The governments focus on improving tourism infrastructure at leisure
destinations and upcoming tourist circuits will boost Sri Lankas overall
attractiveness as a leisure destination, while specific measures to
promote Colombo as a MICE and entertainment destination are likely
to see benefits in the long term.
Along with playing a pivotal role in developing affordable housing and
offices as well as converting heritage sites into retail destinations, the
UDA also plans to make the Beira Lake area Colombos entertainment
and recreational zone to boost Colombos appeal as a tourist
destination. Opportunities for development in the northern and eastern
regions as well as other new emerging tourism zones have also begun
to take shape. Another growing trend is a phenomenal increase in
domestic tourism-domestic travel spending generated 52.1% of direct
travel and tourism GDP in 2013 (WTTC)-against the backdrop of
improved economic conditions and higher disposable incomes.
The Sri Lanka Tourism Promotion Bureau has undertaken extensive

measures to market the countrys tourism offering through tourism
forums, campaigns and other marketing initiatives, which are focused
on key source markets such as India, China and the Middle East.
To realise its full tourism potential, however, Sri Lanka will have to
continue to invest significantly in improving international connectivity,
hotel infrastructure, domestic transport and energy infrastructure.
Growth in Tourist Arrivals
Sri Lankan hotels have started to focus on attracting regional MICE

traffic to their hotels, because of an increase in traffic from meetings,
incentives, conferences and exhibitions (MICE) segments. Sri Lanka
has a strong locational advantage, being in close proximity to the
Indian subcontinent, and has immense opportunity to grow this
segment, particularly business from India and other neighbouring
countries such as Pakistan and Bangladesh. However, there are
World Tourism
5%
Asia Pacific
6%
India
4%
Hong Kong
8%
Singapore
8%
Indonesia
9%
South East Asia
10%
Maldives
10%
Philippines
11%
Malaysia
16%
Thailand
20%
Sri Lanka
27%
Figure 21, Source: UNWTO, 2013
Tourist Arrivals
175
150
Thousands
125
100
75
50
25
0
January
February
March
April
May
2011
June
2012
July
2013
August
September
October
November December
2014
Figure 22, Source: SLTDA
Casino development - The game changer

Along with capitalising on the countrys natural tourist attractions, Sri Lanka is now beginning to emerge as a potential gaming
hub in the Indian subcontinent. Along with other Asian destinations such as Singapore and Macau, the government of Sri Lanka
legalised gaming zones in 2010, and the introduction of casinos has already provided a substantial boost to foreign tourist arrivals,
particularly Indian and Chinese. Sri Lankas proximity to India, where there are strict entry barriers for casino operations has
resulted in a competitive landscape for the Sri Lankan gaming industry. Apart from the nine casinos already in operation, three
gaming-driven integrated resorts, Crown Colombo resort in the heart of Colombo near Beira lake, Waterfront Casino by John Keells
Holdings and Queesbury at D.R. Wijeywardene Mawatha, Colombo have been proposed.
These three proposed projects would make a significant impact on the Sri Lanka tourism portfolio despite concerns over the sociopolitical implications of the gaming industry. Sri Lankas casino industry is largely driven by tourists from other Asian countries.
Casinos attract the affluent tourist population and thus help Sri Lanka to position itself as a premier tourist destination in South Asia,
supporting the hospitality sector.
Tourism to fuel growth in the hospitality industry

Driven by the promising growth in the tourism sector, Sri Lankas hotel
industry has seen a flurry of activity. The impressive development
of infrastructure - the opening of Mattala Rajapaksa International
Airport in 2013, the enhanced road connectivity with the completion
of the Katunayake Expressway and the continued development of the
Southern Expressway has played a part in enhancing the growth of
the hospitality sector. While improved visibility and accessibility are
boosting Sri Lankas overall attractiveness as a leisure destination,
specific measures to promote Sri Lanka as a MICE destination are
also gradually seeing benefits.
The country is developing its hotel infrastructure to meet growing
demand. In 2013, Sri Lanka witnessed an addition of approximately
1,600 rooms, while in 2014; the country is likely to see 37 new
hotel projects adding 2,500 rooms. There have been high levels of
interest from global hospitality players, including Shangri-La, ITC,
Starwood, Marriott, Moevenpick and Hyatt, all of which have projects
underway. Meanwhile, local hospitality leaders such as John Keells,
Aitken Spence, Jetwings, Amaya Leisure and Laugfs Leisure have
aggressive expansion plans.
Existing hotel supply
As of end 2013, Sri Lanka had approximately 27,000 SLTDAapproved hotel rooms, with a high concentration in the high-end and
budget categories. However, the bulk of Sri Lankas hotels are in the
informal category. The past two years have seen strong growth in the
informal sector, with the government encouraging the set-up of home
stay units and guesthouses, among others. There are approximately
233 hotel projects planned or under development across the country,
which will result in approximately 15,370 rooms being added over the
next five years.
As per our estimates, branded hotel supply proposed for Colombo
city is approximately 4,200 keys, while branded hotel supply outside
Colombo includes approximately 2,600 keys along the south coast,
600 keys in Kandy and the hill country region and 800 keys along the
east coast and other emerging regions, while the remaining supply
Major global hotel chains, including the ShangriLa Group, ITC Hotels, Starwood Hotels and
Resorts, Marriott International, Hyatt Hotels
Corporation and Moevenpick Hotels and Resorts,
have hotel developments underway in Colombo
and along the south-west coast.
Hotel Supply - Pan-Sri Lanka
Accommodation Type
Number
Keys
Tourist Hotels
262
15,450
Boutique Hotels and Villas
62
700
Home Stay Units
482
1.5
Guest Houses
970
9,000
Heritage Homes
66
350
1,842
27,000
Total
Figure 23: Hotel Supply, Source: JLL Research, 2014
consists primarily of unbranded accommodation, including boutique

hotels, villas, independent budget hotels and guesthouses.
With the projected growth come numerous challenges for the tourism
industry, including a shortage of skilled staff, a rise in staffing and
energy costs and the need for improved international connectivity and
increased destination marketing efforts.
Upcoming Hotel Supply- Key Projects in Sri Lanka

Brand
Location
Proposed
Positioning
Status
Expected
Opening
Keys
Cinnamon Red
Colombo
Midscale
Newly opened
2014
240
Unconfirmed
Kosgoda
Luxury
Under construction
2015
150
Shangri-la Hotels
Shangri-la
Hambantota
Luxury
Under construction
2015
375
Lanka Hotels & Residencies
Sheraton
Colombo
Upper Upscale
Under construction
2015
306
Sino Lanka Hotels
Grand Hyatt
Colombo
Upper Upscale
Under construction
2015
475
Fairway Group
Unconfirmed
Colombo
Economy
Under construction
2015
196
Softlogic
Moevenpick
Colombo
Upscale
Under construction
2015
180
East West Corporation
Marriott
Weligama
Upper Upscale
Under construction
2015
200
Hemas Holdings/Minor Hotel Group
Anantara
Tangalle
Luxury
Under construction
2015
154
Hemas Holdings/Minor Hotel Group
Anantara
Kalutara
Luxury
Early Development
2015
141
Jetwings
Jetwings
Colombo
Midscale
Under construction
2016
70
Aitken Spence
Riu
Ahungalla
Luxury
Planning
2016
500
Sino Lanka Hotels Holdings
Ozo
Galle
Midscale
Under construction
2016
148
Marino Sands
Colombo
Midscale
Under construction
2017
270
Shangri-La
Colombo
Luxury
Under construction
2017
550
Nexxt
Colombo
Upscale
Proposed
2018
200
Unconfirmed
Colombo
Luxury
Proposed
2018
800
Crown
Colombo
Luxury
Proposed
2018
430
WelcomHotel Lanka
WelcomHotel
Colombo
Luxury
Proposed
2018
300
Indo Lanka Hotels
Crowne Plaza
Colombo
Upper Upscale
Proposed
2019
225
Developer
John Keells Group/Sanken Lanka
Browns Investments PLC
Damro
Shangri-la
Colombo City Centre
John Keells Group
Rank Holdings/Crown Resorts
Figure 24, Source: JLL Research, 2014
Occupancy levels stable; average daily rates (ADR) see slight

growth despite increase in supply
With the consistent growth in tourist arrivals, Sri Lankan hotels
maintained their occupancy levels at 71% in FY3 2014 despite
substantial supply additions across the country across both the formal
and informal hotel sectors, as per SLTDA. Occupancy levels are likely
to see further growth as connectivity and destination marketing efforts
to promote tourism improve. While there have been some corrections
in rates in the five-star category, ADR levels in the country have seen
a slight increase-reflective of a gradual shift in the profile of tourists
arriving in Sri Lanka and an increased spending capacity-from USD
97 in FY 2013 to USD 110 in FY 2014.
Note 3 - FY = April-March
There is a rise in investor

interest and growing
transaction activity. The
Singapore-based Calamander
Group acquired the
Unawatuna Beach Resort
along the south-west coast for
USD 10 million, while Amaya
Leisure PLC recently acquired
a majority stake in Sun Tan
Beach Resorts, which owns
a 125-room resort on the east
coast for USD 4.3 million.
Sri Lanka beyond Colombo
While Colombo is the engine of growth for Sri Lanka, other Tier II cities
also contribute significantly to the countrys economic development.
Some of the other emerging cities in the country include Kandy, Galle
and Hambantota.
Kandy: Kandy is the countrys second largest city and attracts
tourists for its scenic beauty and Buddhist temples. Being centrally
located, Kandy has good connectivity to all parts of the country.
Also, as the administrative capital of the Central Province, the city
hosts various government offices and branches of corporations that
are headquartered in Colombo. In addition, Kandy has its own local
industries ranging from textiles to IT. The city has one shopping mall,
Kandy City Centre, which houses various local and international
brands. With the airport and an expressway that connects with
Colombo under construction, we foresee heightened economic activity
here in the coming years.
Hambantota: Located at the southern tip of Sri Lanka, Hambantota,
which was hard hit by the 2004 tsunami, is now fast emerging as the
second major urban hub in Sri Lanka. The city is ideally placed along
one of the worlds busiest shipping routes, so it has been developed

into a port hub. This development is expected to catalyse the economic
activity in this region; recently, the port started bunkering operations.
The city now hosts one of the two international airports in Sri Lanka
and a railway link which is currently under construction, to facilitate
harbour operations. The railway connection will be an extension of the
western coastline railway link, which connects major locations along
the western coast. Similarly, the southern expressway that connects
Colombo and Matara will soon extend till Hambantota. The city is a
major producer of salt, is home to the first wind farm in Sri Lanka and
has a 35,000 seater international cricket stadium.
Galle: Galle is the third municipal council in Sri Lanka after Colombo
and Kandy. Situated at the south-western tip of Sri Lanka, Galle is the
administrative capital of the Southern Province. The city has very good
connectivity to Colombo through the Southern Expressway and the
western coastline railway link. Galle Fort, which was built during the
Dutch era, is one of the main tourist attractions in the city, while the
citys natural harbour and other religious places also attract tourists.
Kankasenthurai
Jaffna
Sri Lanka Map
Pallai
Kilinochchi
Mullaitivu
Mannar NORTHERN
Talaimannar
Vavuniya
Omanthai
NORTH
CENTRAL
Madhu Road
Trincomalee
Medawachchiya
Anuradhapura
Puttalum
Polonnaruwa
EASTERN
NORTH
WESTERN
Batticaloa
Kandy
Kurunegala
Matale
Kandy
Colombo
Katunayake
Gampaha
CENTRAL
Kegalle
Nuwara Eliya
Colombo
Kottawa
SABARAGAMUWA
SOUTHERN
Road Infrastructure Projects

Railway Infrastructure Projects
Badulla
Ratnapura
WESTERN
Galle
Port Projects
Figure 25, Source: JLL Research, 2014
Oluvil
Monaragala
Kalutara
Airport Projects
Ampara
Galle
Matara
Hambantota
Beliatta
Kataragama
Hambantota
Colombo
Kandy
Galle
Hambantota
Population
(District) - 2012
2.31 Million
1.37 Million
1.06 Million
0.60 Million
Population
Density
(per sq km) - 2012
3238
714
655
239
Poverty Head
Count Ratio 2012/13
1.4
6.2
9.9
4.9
Labour force
participation %
- 2012
45.9
45.1
44
50.8
Unemployment
rate % - 2012
2.9
7.2
2.3
5.3
Literacy rates %
- 2012
95.8
92.4
96.6
88.8
Airport
Bandaranaike
International Airport,
Ratmalana Airport
Domestic
Airport U/C
Domestic
Airport
Mattala Rajapaksa
International Airport
Port
Port of Colombo
No Port
Port of Galle
Port of Hambantota
Connectivity
through
Expressway
All Expressway
connected to Colombo
Colombo Kandy - U/C
Southern
Expressway
Southern
Expressway - U/C
Railway
network
Yes
Yes
Yes
U/C
Figure 26, Source: Department of Census and Statistics - Sri Lanka, JLL Research
Infrastructure activity outside Colombo

Southern Expressway: Phase I from Kottawa to Pinnaduwa
Northern Railway Line reconstruction project: The segment
(Galle) was completed in 2011, Phase II from Pinnaduwa (Galle)
between Medawachchiya and Madu Road was completed in 2013,
to Godagama (Matara) opened in March 2014, and feasibility
while work on the Madu-Thaleimannar and Omanthai-Pallai lines
studies for Phase III of the 96-km-long Matara-Hambantota line
is likely to be completed during 2015. The Pallai-Kankasenthurai
has been completed.
Railway Line is slated for completion in 2016.
Mattala Rajapaksa International Airport: Phase I of the Mattala
Rajapaksa International Airport at Hambantota will be able to
handle 1 million passengers, 30,000 aircraft movements and
45,000 tonnes of cargo each year.
Hambantota Port development project: The bunkering
operations started in June 2014 in the newly built ship fuelling unit
at the port of Hambantota-which has been operational since 2010with an initial capacity of 55,000 tonnes.
Oluvil Port development project: Situated on the eastern side of

the country, the project comprises of a commercial harbour and a
basin for fishing craft.
Matara-Kataragama Railway Line project: This 114.5-kmlong Sri Lankan railway project, currently under construction,
will extend the coastal line from Matara to Kataragama via
Hambantota. Phase I of the project from Matara to Beliatta is
expected to be completed in 2016.
Uncovering global real estate cost-saving techniques
Inflation, increasing domestic costs and external uncertainty has

pressured both the top and bottom lines of companies. With real estate
costs being the second largest cost component after human resources
for the services industry, awareness for it amongst office occupiers and
developers regarding various cost-saving opportunities is important.
Global real estate cost-saving trends such as alternative workplace,
flexitime, periodic dark space audits, regular sustainability and
energy audits should be carried out proactively. Outsourced facilities
management and professional project management teams should be
employed from the project planning and design stage to the postcompletion maintenance and renovation stage to save costs.
Looking beyond the conventional cost-saving techniques and
considering the cumulative effects of saving trivial cost could lead to
significant improvement in the overall financial health of the occupier
or the developer. These cost-saving trends and techniques are not just
restricted to office real estate, but can also be utilised across other
property sectors, including the retail, residential and hospitality sectors.
Dark space audit

Most of the companies that are not measuring and monitoring how
their office space is being used are missing a massive opportunity
to reduce real estate and energy costs. As companies strive to use
their facilities as efficiently as possible and perhaps reduce their
overall real estate costs, re-examining existing vacant space can
prove constructive for the company. A dark space audit counsels the
inspection of the amount of space that remains physically vacant from
the overall area occupied and for which the tenant is bearing the rent
burden arising out of it.
Typically, many corporations may have a 1225% vacancy rate in
their portfolio. This shadow space tends to be spread throughout a
building or portfolio and is not easily assembled to dispose of through
a restructure, sale or lease/sublease. A meticulous planning exercise
could help occupiers unlock these spaces and use them more effectively. It
may require spending capital to rework existing spaces to accommodate a
consolidation, but, many times, the pay-off is outstanding.
Alternative workplace strategy

As communication technologies are rapidly evolving, employees
are increasingly being able to work from any location at any time.
Alternative workplace strategy (AWS) provides approaches to support
this changing work environment. The strategy combines non-traditional
work practices, settings and locations, all of which result in the
evolution of traditional office space. AWS creates an environment that
supports and enables employee needs. This strategically bundled
concept results in increased cost savings, more efficient space
utilisation and higher productivity and also reflects an organisations
brand values. In addition, workplace strategies are emerging as a
global imperative for optimal employee productivity, satisfaction and
retention. Essential to the overall portfolio and expense management,
mapping AWS can stir an organisation to ultimate success.
Dark Space Audit
Optimal
Space
Utilisation
Integrated facilities management

The concept of outsourcing facilities management (FM) is at its
nascent stage in Sri Lanka. Companies have historically adopted
more of an in-house model with an out-tasking approach in which
single services such as cleaning, catering or maintenance, are
delegated to external providers. Globally, the concept is shifting
towards the adoption of integrated facilities management (IFM)
outsourcing as a more strategic operating model that integrates
these single services and other tasks into a seamless function. It
significantly delivers greater value than the sum of its parts. This
value comes in the form of reduced costs, minimised risks and
increased end user satisfaction. Initially spearheaded by Western
multinationals, specialist expertise attracts an increasing number
of companies. While the FM industry is still evolving in Sri Lanka,
the shortage of qualified talent, benchmarking data and high-quality

service providers and suppliers could create challenges in the quality
and consistency of services.
Occupiers of real estate often consider criteria such as a pleasant,
flexible and reliable work environment; corporate sustainability; and
ethics when appointing service vendors. Professional FM, delivered
to international best practice standards, can directly influence the
provision of a more attractive and productive work environment. IFM
drives continuous improvement by customising the model to suit
the needs, enabling a company to respond to changing business
requirements and providing confidence in achieving the desired
outcomes. IFM services offer manifold solutions:
Engineering services
Workplace solutions
SOFT services
Space/occupancy services
Lifts
Reception
Janitorial
Minor projects
Plumbing
Mail
Cleaning
Space planning
Energy
Reprographics
Landscaping
Moves/adds/changes
Utilities
Catering
Security
Headcount tracking
Electrical
Transport
Heating, ventilation and

air conditioning (HVAC)
Concierge
Archiving
Case study from Colombo: A clients energy bill cost savings for an eight-year-old G+5 building with an area of 189,000
sq ft, approximately 2,400 users and 24/7 operations. The buildings energy consumption in 2012 was 5.2 MW/hour.
Initiatives: Optimised chiller operations by increasing the outlet temperature set point, setting the air handling unit (AHU)
to auto mode and monitoring the floor temperature on a 24/7 basis.
Results: Savings based on 6.5 months electricity meter readings (June-December 2013 versus June-December 2012)
Electricity
consumption savings
in 6.5 months
Electricity
consumption savings
prorated for 12 months
188,671
348,315
kWh/annum
kWh/annum
Prorated
savings in local
currency
6.62
LRK
million/annum
Prorated
savings in US
dollars
USD
52,000
annum
Property and asset management

Property and asset management (PAM) becomes the critical link
among the various stages of a projects lifespan. It not only ensures
the end-to-end asset lifespan-from the project planning and design
stage to the post-completion maintenance and renovation stage-but
also attempts to eliminate the gaps that exist among the various
stages of a projects lifespan. The significance of an efficient PAM
practice is quite substantial and typified by changing occupier
preferences and the emergence of sophisticated development
models. Property management involves the handling of day-to-day

property maintenance (engineering, security and soft services,
among others) and developing and implementing strategic property
management plans. Asset management, on the other hand, has
a long-term approach. This involves creating and implementing
strategies that focus on financial returns from an asset pertaining to
optimising income streams, lease management, mitigating risks and
optimising the utilisation of assets.
Components of PAM
Infrastructure management
ASSET management
VALUE-ADDED SERVICES
Power/electricity
Tenancy management
Predictive maintenance
Water supply and waste
Risk management
Disaster management
Landscape and road
Lease administration
Building
Financial management
Energy and sustainability

management
Telecom
Portfolio and asset

management
Soft services
Project management
Project management (PM) professionals serve clients to fit-out or construct a new facility. In this scenario, occupiers need a
partner who has the experience and knowledge to deliver the requirements. Today, delivering a successful project goes beyond
being on time, on budget and within specification. PM professionals commit to help identify and manage project risks before they
become costly problems. Understanding the local culture, regulations and business drivers, PM professionals support clients in
effectively completing a wide variety of project types across industries-from corporate offices and industrial developments to new
campuses and mixed-use developments. The various facets of the service include:
Interior fit-out
Tenant
improvements
Asset analysis
Multisite
programmes
Construction
management and
monitoring
Move management
Capital
improvements
Development
management and
advisory
Technical due
diligence
Design-andconstruct
development
Shining bright in the investment radar
Improving economic sentiment throughout the West and in India is expected to support exports, investments and tourism,
which in turn are anticipated to drive domestic consumption. Inflation in the economy is softening, and the Central Bank of Sri
Lanka (CBSL) has started to loosen its monetary stance. This will allow more lending to the private sector, further supporting
domestic consumption.
The government is laying a strong platform to launch its economy on a high-growth trajectory. Consequently, the government
is focusing its efforts on activity such as infrastructure development, rehabilitation of the war-torn Northern Province and job/
talent creation.
Recently, Coface, a multinational credit insurance company, identified Sri Lanka as one of the top five new emerging
economies in the world. Apart from the investments by developers from India and South Asia, private equity funds have also
started actively studying this new emerging market.
However, to exploit the opportunity, the following points need to be addressed immediately:
The country should fast track the proposed mass transport systems, such as the monorail and metro, which will have a
direct positive impact on Colombos suburban real estate.
Human resources should be appropriately trained to enhance economic and social development.
Private players have to be encouraged to develop affordable housing projects through government schemes with subsidised
borrowing rates.
Developers should be encouraged to develop more commercial developments in line with the business expansion plans of
the industry bodies.
Economic Indicators
2013A
2014F
2015F
GDP Growth at Constant prices4
7.3%
7.5%
7.5%
Inflation - Avg. Consumer prices changes4
6.9%
5.0%
6.0%
GDP per capita - Current prices - USD5
3,280
3,385
3,658
Total Investment to GDP5
31%
33%
30%
Current A/C balance to GDP4
-2.0%
-2.6%
-3.5%
Figure 27: Economic Indicators, Source: JLL Research, Note: 4 - Asian Development Bank; 5 - IMF Outlook
Authors
Vasanth Raghunathan
Assistant Manager - Research and REIS
vasanth.raghunathan@ap.jll.com
+91 44 3095 1063
Sujash Bera
Assistant Manager - Research and REIS
sujash.bera@ap.jll.com
+91 33 2227 3293
Special Contribution
Robin S
Manager - Strategic Consulting
robin.s@ap.jll.com
India +91 87544 04800
Sri Lanka +94 774 668 757
Roopa George
Senior Associate - India
Hotels & Hospitality Group
roopa.george@ap.jll.com
India +91 99530 58164
Strategic Inputs
Ashutosh Limaye
Head - Research and REIS
India
ashutosh.limaye@ap.jll.com
+91 98211 07054
Shankar Arumugham
Head - Strategic Consulting
Sri Lanka
shankar.arumugham@ap.jll.com
Sri Lanka +94 776326 888
India +91 99400 66869
Business Enquiries
Gagan Singh
CEO - Business, India
Chairperson - Sri Lanka Operations
gagan.singh@ap.jll.com
Sri Lanka +94 777 444094
India +91 98111 51610
Sanjeev Nair
Head - PAM & IFM
Sri Lanka
sanjeev.nair1@ap.jll.com
+94 776 868245
Sunil Subramanian
Head - Transactions
Sri Lanka
sunil.subramanian@ap.jll.com
+94 775522155
Acknowledgement:
We would like to acknowledge Ponni.S and Supun Fernando, for their valuable contribution to this research paper.
About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased
value by owning, occupying and investing in real estate. With annual fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more
than 200 corporate offices and operates in 75 countries with a global workforce of approximately 53,000. On behalf of its clients, the firm provides
management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed
$99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has
$50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.
JLL has over 50 years of experience in Asia Pacific, with over 28,453 employees operating in 80 offices in 16 countries across the region. The
firm was named Best Property Consultancy in seven Asia Pacific countries at the International Property Awards Asia Pacific 2014, and won nine
Asia Pacific awards in the Euromoney Real Estate Awards 2013. www.jll.com/asiapacific.
For further information, please visit our website, www.jll.com
About JLL Lanka

JLL Lanka is a leading professional services firm specializing in real estate in Sri Lanka. Based out of Colombo, the firm provides investors,
developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, project
and development services, property and asset management, integrated facilities management, real estate capital markets and transactions
encompassing commercial office spaces, hotels, land, industrial, retail and residential units. The Firm aims to combine local market knowledge
with its access to global multinational relationships and capital sources, to provide Sri Lankan corporates, government agencies and clients with
superior execution, towards transforming their real estate portfolios into efficient inventories, as well as in raising capital for real estate assets.
For further information, please visit www.jll.com.lk
JLL Lanka Office

34, East Tower, World Trade Center
Echelon Square, Colombo 01
Sri Lanka
tel +94 117 444 555
fax +94 117 444 556
Jones Lang LaSalle Lanka (Private) Limited 2014. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

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Sri Lanka Scaling New Heights

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Sri Lanka Scaling New Heights

Tracking Real Developments Across Real Estate

Sri Lanka - Scaling New Heights

Strong fundamentals reignite high growth

Sri Lanka GDP by Sector

Industry (excl Const.)

Figure 1: GDP by sector, Source: CBSL

Sri Lanka - Scaling New Heights

The 25.8 km long

Phase I of the 29.2 km

The Beira Lake

Sri Lanka - Scaling New Heights

Secondary - Colombo 4,5, 6,7, 8, 9, 10

Secondary North - Colombo 11, 12, 13, 14, 15

Floor Area Ratio

3,000 and above

Figure 3: Floor Area Ratio, Source: City of Colombo

Figure 4: Colombo Map,

Dehiwala - Mount Lavinia

Colombo residential market - The investors home

Less than 12,000 (92)

Less than 12,000 (92)

Figure 5: Apartment cost, Source: JLL Research

Interest Rates on Lending for housing purpose (%)

National Savings Bank

State Mortgage and Investment Bank

Benchmark Interest rate

Sri Lanka - Scaling New Heights

Developers target the NRSL community

It is important to mention that workers

Workers Remittances (USD Million)

Figure 7: Workers Remittances, Source: CBSL Annual Report

Sri Lanka - Scaling New Heights

Investing in the Sri Lankan residential real estate market

Investment in Residential Real Estate

No restriction to invest in Land / Condominiums

Figure 8: Investing in Sri Lankan Residential Market, Source: JLL Research

Sri Lanka - Scaling New Heights

Rate of Construction Progress = Sales Velocity rule is universal

Quoted rate (USD/sqft)

Keppel CT Developments Ltd

South City Projects

110 Parliament Road

Apurva Natvar Parikh group

Although we foresee the reverse migration trend and investments

than 500 housing units in this segment to be absorbed annually for

Some of the proposed projects in the luxury and upper-mid segments:

Quoted rate (USD/sqft)

Colombo City Centre

Silver Needle - Abans

Sri Lanka - Scaling New Heights

How affordable is Colombo?

Mean Monthly Income based

Even the top 10% of households with a mean monthly income of

B/(A*12) - Affordability ratio - If the ratio is less than

Even in suburban locations, the top 10% of income-earning

Figure 11: Methodology, Source: JLL Research

Ticket sizes of the

Figure 12: Affordability Heat map, Source: JLL Research

10 Sri Lanka - Scaling New Heights

Housing the masses - The government takes charge

UDA partners with private developers

The socioeconomic condition of the lower-income segment of the

To boost the affordable housing sector and elevate the living