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Pakistan Real Estate Report Q4 2010
Business Monitor International, Sep 2010, Pages: 56
Business Monitor International's Pakistan Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's Real Estate industry.
Key Insights On The Real Estate Sector Of Pakistan
The last year or so has been very challenging for the protagonists in Pakistan’s commercial Real Estate sector. Rents have fallen in Islamabad and Karachi (although not, apparently, Lahore) –and across all three sub-sectors. It also appears that there have been sharper drops in prices and capital values, with the result that yields have in some cases increased.
This has happened even though Pakistan’s economy has suffered far less from the global financial crisis than its counterparts have in many other developing countries. The fundamental problem is a lack of demand from potential commercial tenants. The dangerously unstable political and security situation has resulted in the overall level of demand for commercial space falling well below that which is available. Our sources report vacancy rates of 40-50% in Lahore and Karachi. Perhaps because of the larger government presence, the vacancy rates in Islamabad are only around 10%.
Property owners also have to contend with the looming completion of a number of new, mixed and prestigious developments, such as the Centaurus in Islamabad. Our sources indicate that the likely impact of these new projects will be to attract tenants from surrounding, and older properties – not least because they offer better physical security.
That these developments have continued at all is testament to the fact that a number of the protagonists understand, and are extremely tolerant of, the risks of doing business in Pakistan. Foremost among these is the Defence Housing Authority (DHA). Projects have also been supported by Middle Eastern multinationals; however, some of these companies, which are both developers and potential occupiers of space in Pakistan, have suffered as a result of the financial crisis in Dubai.
The comments from our sources in Pakistan indicate that rental yields have been volatile recently as a result of the slippage in rentals and (often) a greater fall in prices and capital values. Looking forward, we envisage that yields will stabilise from 2011 onwards, and at levels that were prevailing in 2008 and 2009. Interviews of in-country sources were conducted in mid-February 2010 and again in July 2010.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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