Around 21 high-rise projects in Colombo with a total estimated investment of US$ 4,284 million are at various stages of planning and development, a research report showed.
A report published by TKS Securities, ‘Colombo, a modern city in the making’, has highlighted 22 ongoing or planned high-rise mixed development, apartments, hotels, malls and office space related projects. Some of these projects include JKH’s US$ 850 million mixed development project, the highest in terms of investment, the controversy riddled Krrish Square at US$ 650 million, Australian casino magnate James Packer’s Crown mixed development project at US$ 400 million and the US$ 400 million Shangri-La hotel, tipped to the country’s first seven-star establishment.
TKS Securities has identified nine large scale mixed development projects, five standalone apartment projects and six three to five star hotel projects which have been announced in and around the city of Colombo. "The developments we have identified together would add c.3,000 apartment units and more than 3,000 three to five star hotel rooms in the coming 4-5 years. However we do not expect a glut in hotels, apartments and retail space as the development would be automatically phased out," it said.
"Steps have been taken by means of improving the quality of the road network and beautification of the city to make the metropolis one of the greenest and cleanest cities in Asia. To cater to the required capacity increase in hotels, apartments, office and retail space, many projects including mixed developments have been proposed. However due to back and forth movements in certain policies and other delays, only few out of the announced projects are currently underway while the others are expected in the medium term. Therefore due to the disparity between the currently needed capacity and actually completed, a deficit in supply exists. Thus we believe that there would not be a glut due to these projects being automatically phased out," TKS Securities said.
"The government through the state owned Urban Development Authority is involved in the city development whilst many private companies have proposed projects. However out of the listed companies, few such as John Keells Holdings (JKH : LKR260.10), Colombo Land and Development (CLND :LKR43.70), Overseas Realty (OSEA : LKR18.50) and Access Engineering (AEL : LKR20.30) have grasped such opportunities.
"In the five star city hotel segment a shortfall of about 1,500 hotel rooms (by 2016) would be seen in meeting the expected tourist arrivals trend where the city is currently equipped with 2,000 hotel rooms. A deficit would be evident till 2016/17 as only two five star hotels out of the proposed projects are off ground currently (of capacity 700 rooms).
"At present, the total number of apartment projects ranging from standard to luxury levels in and around Colombo adds up to c.100, with most of these falling into the standard category. The demand for luxury to semi luxury apartments mainly come from Sri Lankan expats on motive of renting the purchased units. Hence the gradual increase in apartment capacity would meet the slowly growing demand for apartments in line with the maturing city.
"Due to limited prominent office space available in the capital and few office spaces been proposed, ample opportunity in this segment exists.
"Proposed retail space and other mixed developments would see the demand changing mainly with the increasing number of tourists from the Indian sub-continent whilst the gaming industry would go hand in hand to create a new demand wave.
"The country having an annual tourist count exceeding 1 million would see an additional demand with the growth in the casino industry which is yet to see a global player entering the fray. However it would be a matter of time and we believe that this would create further upside in demand for hotels, apartments and retail space," TKS Securities said.
"Sri Lanka’s gaming and entertainment industry looks optimistic with interest being shown from both local and foreign parties to enter the Industry. Sri Lanka’s casino market is a fragmented industry with six licenced casinos operating in Sri Lanka, namely Bellegio, Ballys, MGM, Stardust, Marina Colombo and Ritz. In the six years leading up to 2011 casinos contributed LKR1.7 bn in tax revenue.
"The targeted market for gaming clientele would be wealthy Indian and Chinese Players. As seen through the enhancement of the gaming industry in Maccau and Singapore (both regions operating a multi-billion dollar industry dwarfing the iconic Las Vegas) it invariably leads to more tourist arrivals where Sri Lanka could expect more tourist arrivals from India, China and the Middle Eastern region. Thus the huge growth potential in the industry particularly due to the current scale of the casino industry in Sri Lanka citing the Indian traffic as a lucrative target market is further evident with the interest shown by industry tycoons such as Packer (as indicated by the media). This could lead to the expansion of tourist arrivals from other regions as well which would assist in the demand for hotels, apartments and retail space," TKS Securities said.