Real Estate Market
Pakistan’s real estate sector, despite facing a complex and challenging landscape, presents a range of promising opportunities that could catalyze significant growth, according to a recent research report by Savills, a leading real estate company.
The report highlights that the office sector, co-working and serviced office spaces, and regional retail malls have demonstrated robust demand. With appropriate structural reforms, Pakistan has the potential to capitalize on its large working-age population and transition towards an export-led economy.
This transition would necessitate development in office and industrial spaces, alongside fostering a tourism hub to boost the hospitality sector. These areas of growth offer avenues for investment, job creation, and sector-wide expansion.
Currently, the real estate sector is grappling with challenges such as fluctuating property values and high interest rates. Data for the first nine months of the fiscal year 2024 (9MFY24) indicates that construction projects have experienced sluggish growth, with some being temporarily halted. Despite these obstacles, Savills sees opportunities for market stabilization and future growth.
In the face of political instability and a slow macroeconomic recovery, there have been notable achievements. The number of Real Estate Investment Trusts (REITs) has increased, with assets surpassing Rs280 billion, and 39 Non-Banking Financial Companies (NBFCs) have been licensed to operate as Real Estate Management Companies (RMCs).
The office sector remains a strong performer, with multinational corporations (MNCs) and large local groups showing a continued demand for premium office spaces.
Grade A office buildings in major cities like Karachi, Lahore, and Islamabad are maintaining high occupancy rates, despite economic slowdowns. Over the past year, there has been a slight increase in office leasing transactions, particularly among MNCs and major local companies.
Similarly, co-working and serviced office spaces are experiencing high occupancy rates and expansion across major cities. The hospitality sector is also recovering, with occupancy rates returning to pre-Covid levels and average daily rates (ADRs) surpassing pre-Covid figures, largely due to inflation.
The industrial sector is another promising area, with significant investments from global players like Maersk, which has committed $2 billion to Pakistan’s port and transport infrastructure over the next two years.
Abu Dhabi Ports Group has also signed agreements worth $395 million with the Karachi Port Trust (KPT) to manage operations at key berths in Karachi Port. These investments are expected to boost exports and stimulate further investment in the sector.
The retail sector has shown resilience, with regional malls across major cities maintaining high occupancy rates. The upcoming opening of Dolmen Group’s new mall in Lahore, set for October 2024, is anticipated to enhance Lahore’s Grade A mall inventory.
However, the residential sector has struggled this year, primarily due to speculative investment rather than end-user demand. The past year has seen a significant drop in demand, resulting in lower take-up rates compared to previous years.
Looking ahead, Savills remains optimistic about the real estate market. The sector continues to attract Pakistani investors, and with the expansion of REITs, RMCs, and improved access to capital, new opportunities for developers are expected to emerge.
Although the market has recently experienced a slowdown, Savills is confident that as the economy stabilizes, the real estate sector will regain momentum in the coming years.
Savills Pakistan provides a range of professional advisory services to support both developers and investors, assisting in decision-making and finance-raising efforts for real estate developments.
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