Written by – Ranuli at OmeBiz
With more people flocking to urban areas, competitive environments changing and new-retail being on the rise, Colombo is experiencing the change, that is, mixed-used developments.
What do we mean when we say “mixed-use developments,”? In short, mixed-use developments are buildings that combine cultural, commercial, industrial and residential activities. These are mainly buildings that are ticking the work-live-play boxes, where people who live and work in these developments enjoy easy access to a wide range of amenities as, retail stores, restaurants, multifamily housing, entertainment, that in turn results in a better quality of urban life. And this quality of life enhancement is brought about by a large saving in quality time that is available for social interactions with family and friends. While mixed-use traditionally meant residential above with retail on the ground floor, the term is now much more diverse. It could be a retail-led development with attached residential, or an office tower with leisure facilities.
Cities that embrace these developments have benefitted from low infrastructure costs and reductions in greenhouse gasses resulting in such cities being more efficient economically and greener.
The real estate players have identified this as the right time to focus on mixed-use developments and have begun to make these investments a priority. Key projects in this space today are Marino Mall and Colombo City Centre with Cinnamon Life, Odel Mall, One Galle Face, Altair, Grand Hyatt, ITC Colombo One Hotels and Residencies, Havelock City, Port City and so many more underway in Colombo alone.
However, with such a rapid influx, the country is seeing a low demand for mixed-use developments.
Only the top 20% of Sri Lanka’s income-earning households can afford to build or buy houses in Colombo and its suburbs. And from that 20% only the bottom 10%, with a mean monthly income of about Rs. 300,000, can afford a two-bedroom lower-mid apartment in a suburb and the remaining top 10% of income-earning households may be able to purchase a two-bedroom upper-mid apartment in suburbs Colombo.
Thus, this implies that apartments in the central sub-market and luxury upper-mid projects in the secondary sub-market have to rely on residents with high net-worth. Furthermore, as mixed-use developments often incur large construction costs and high borrowing costs, this makes them even pricier, restricting the market to only the high-income-earning residents in Sri Lanka.
Consequently, with a massive supply and low demand to support it, will the balloon, that is, mixed-use developments, burst in Sri Lanka?