Land value in the Colombo district has been hit by the COVID-19 pandemic making it a victim with the annual growth rate declining during the first half of this year. This has brought down the prices of residential, commercial and industrial property category, the Central Bank data showed .
The growth in land values in the Colombo district fell below 10 percent for the first time in several years, decelerating to 7.1 percent year-on-year (YOY) in the first half of the year from 10.8 percent recorded in the second half of 2019.
This was highlighted in the Land Valuations Indicator (LVI) complied by the Central Bank (CB).
The indicator reached 141.6 points with an annual increase of 7.1 percent during the first half of the year backed by 7.2 percent YOY growth in industrial land values, 7.1 percent YOY growth in both residential and commercial land values in the period.
On a semi-annual basis, the growth in land value in the Colombo district also decelerated to 2 percent in the first half of the year compared to 5.1 percent in the second half of 2019.
“Both annual and semiannual percentage changes of LVI showed a declining trend over the recent periods,” the Central Bank said.
The growth in land values in the Colombo district peaked to 16.3 percent YOY and 17.9 percent YOY in the first and second half of 2018. Since then, the growth in land values in the Colombo district has been trending downwards.
The Research Intelligence Unit (RIU), which has monitored real estate markets for 17 years, and conducted a survey among Grade A and B commercial space tenants in their latest update, titled the "Commercial Property Market Report," said that challenges would remain for many real estate properties in the short- to medium-term.
According to tenants that completed the RIU’s survey, technology firms, healthcare, and telecommunication were considered to be the industries which will drive demand for commercial real estate. Advertising, construction, security firms, and travel were understandably expected to remain stagnant.
“A majority of tenants believe that COVID-19 will affect the number of upcoming office spaces in Colombo, and it could shift demand to outer suburb areas (less urbanised).
According to informed sources, some tenants are considering leaving Grade A offices and moving into smaller spaces in the suburbs.
"This is mainly due to reduced business activities in the post-COVID-19 era, which has gravely impacted on some companies, and they are unable to keep up with the high rentals in Grade A offices," the report said.
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