V

FEATURES
tions,
infra-structure
deficiencies
a n d lack of trained manpower, have
compelled t h e Government t o dec
elerate t h e initial t h r u s t . Yet
the
emphasis r e m a i n s sustained
and
t h e overall strategy continues
un
M. W. J. G MENDIS
changed.
Against t h e above background,
The business premises market in Colombo continues to be quite active
the u r b a n center which h a s borne
nearly three years after the initial promotion of urban development
t h e severest stress and s t r a l n t of t h e
policies. While office and stores space supply is in large excess over
new policies comprise t h e p r i m a t e /
demand, commercial floor space is in short supply; though business
capital city of Colombo. I t ' s central
space in Fort appears to be saturated. A disturbing
trend,
however,
business district of Fort a n d P e t t a h ,
is that the utilisation of houses for business premises continues on a
and t h e adjacent nodal areas of
substantial scale, thus further aggravating the supply of houses for
Colpetty, Slave Island, a n d
Maraactual residential use. These are some of the findings in a survey of the
d a n a have come u n d e r massive pres
Business Premises Market conducted over the last two months by Willie
sures of d e m a n d for floor space a n d
Mendis, Professor of Town and Country Planning at the University of
for land (vide Map 1). T h e r e n t a l
Moratuwa. He also makes specific recommendations regarding the moni
a n d capital values of buildings a n d
l a n d rose t o
astronomical
values.
toring of the Business Premises situation and a policy for office location
(Vide Table 2) Such factors coupled
together with a ban on the future use of houses for business premises
with t h e attractive fiscal and other
and a time limit to be given to those already occupying residential bun
Incentives offered t h r o u g h a pack
galows to progressively vacate these houses.
age of liberal m a r k e t oriented
policies of t h e Government h a s r e
Urban Development
h a s r e transfer clearly distinguished "pro sulted in a "property boom" on a
ceived a massive stimulus i n Sri L a n motional u r b a n development" from scale never witnessed before in t h e
k a in the p a s t three years. T h e "negative
development
control". country. Developers began to con
Such
conceptual features
have struct new premises
allocation of public investments i n
or Improve
marked t h e beginnings of a new existing structures or modernise r e
u r b a n activities a n d t h e conscious
era in t h e development process
in cent
p l a n n i n g of t h e u r b a n
sector h a s
buildings all with
the
Sri L a n k a wherein
Planners will single purpose of "cashing-in"
now become a n integral p a r t
of
on
henceforth be
compelled t o
bond t h e boom.
t h e process of n a t i o n a l development.
rural
with
urban,
a
n
d
ensure
their
Thus, of t h e t h r e e
lead
projects
complementarities for m u t u a l
and
The dynamics of t h e property
being pursued by t h e Government,
boom were reacting so rapidly t h a t
two of t h e m , namely t h e "Free national benefit.
T r a d e Zone" a n d "Urban Renewal
Currently, u r b a n
development both policy makers a n d developers
a n d Housing, comprise u r b a n p r o
is being severely
"tested" by
t h e were unable t o respond with corres
jects. At n o previous time h a s t h e r e various p h e n o m e n a associated With ponding speed in t h e i r comprehen
been such a t t e n t i o n focussed
on its infancy.
Government
policies sion of it. Accordingly, t h e consequ
t h e u r b a n sector.
have established very
clearly t h e ences have not been properly a n t i
to cipated, organised a n d monitored.
I n t h e r e c e n t past, u r b a n de "most appropriate environment"
urban
development.
velopment h a d been viewed i n t e r m s promote
I n this situation, a n occasional
of conventional "town improvement" Nevertheless these m u s t be matched insight i n t o t h e behavioural p a t t e r n
or a n outcome of "physical p l a n by t h e correct responses from t h e i n
profes of t h e m a r k e t becomes most rele
ning". Consequently, it
became a stitutional, legislative a n d
Hence t h i s P a p e r h a s a t
"social overhead sector"
associated sional structures. I t is t h e latter t h a t vant.
poses t h e greatest challenge in u r b a n tempted such a situational analysis
w i t h t h e ordering of l a n d uses in
towns a n d cities so as t o secure development. Already resource limita of t h e Business Premises Market.
convenience, beauty a n d design of
Table 1
t h e landscape. I t was only i n t h e
mid 1970's t h a t t h e d e m a n d s of
ALLOCATION O F PUBLIC INVESTMENT FOR URBAN DEVELOPMENT
t h e u r b a n sector began to manifest
itself
in wider dimensions, thereby
1979-1983
1980-1984
1981-1985
seeking a g r e a t e r share of national
Period
1978 Programme Programme Programme
resources.
T h e actual
transition
from
Gross Public Investment (Rs. Million) ...
7,127
77,107
67,341
89,579
"town improvement" t o "Integrated
% Share for "Urban Renewal and
u r b a n development" took place
in
Housing Programme
...
10%
13%
10%
10%
September 1978 with t h e creation of
t h e U r b a n Development
Authority
Source: Public Investment 1979/83, 1980/84 & 1981/85, Ministry of Finance &
u n d e r t h e U r b a n Development Au
Planning, Colombo.
thority Law No. 41 of 1978
This

The Business Premises Market in the City

of Colombo - Asituationalanalysis

The UDA Law provides for the promotion of "integrated planning and
implementation of economic, social, and physical development of cer
tain areas as may be declared by the Minister to be Urban Deve
lopment Areas".
(2) Approved urban development projects are offered ten-year tax holi
days. Further, massive public investments amounting to several
thousand million rupees are being allocated to urban development
and associated activities. (Vide Table 1 ) These are supplemented by
liberal import policies.

(1)

Purpose a n d Scope of Paper

As mentioned previously,
a
study of the dynamics of
urban
development is most timely
and
opportune after t h r e e years of its
active
promotion. T h e purpose of
this P a p e r is t h u s t o m a k e a con
tribution towards t h e fund of such

22

ECONOMIC REVIEW, J U N E / J U L Y

1981

desired knowledge. I t h a s analysed

one aspect of it namely t h e p r e vailig situation in t h e u r b a n p r o perty market.

T h e P a p e r h a s confined
its
study to Business Premises only, a n d
does not encompass t h e entire p r o
perty market. It's average comprises

Office,
Commercial,
and
Stores
premises in t h e city of Colombo.
I t h a s examined the d e m a n d
and supply of t h e above mention
ed categories of premises in t e r m s
of floor space. I t has not Included
a corresponding study of rentals and
investments.
Methodology of Study
T h e methodology employed in
the study h a s been to examine t h e
public advertisements appearing In
daily newspapers
in its "Business
Premises" and "Real Estate" columns
under "Wanted" a n d "Available" c a p
tions.
T h e newspapers chosen for this
study have been t h e "Daily News",
"Sun" "Sunday Observer" and
the
"Weekend". (These lead t h e circu
lation figures amongst t h e English
language newspapers).
T h e period of study h a s been
62 days (or
approximately
two
m o n t h s ) , from 12 May 1981 to
12
July 1981, both dates inclusive.
T h e following factors h a v e been
t a k e n into account i n t h e study:
(I) repetitive advertisements
have
been identified and avoided being
used again.
(II) where office cum any other uses
were advertised then only Of
fice use was counted in computa
tion.
(ill) where Houses were advertised as
suitable for Office or Commer
cial premises, then floor
area
''was computed as approximately
found according to number of
rooms in the house,
(iv) where multiple postal zones in
city were requested by Adverti
ser, only the first mentioned zone
has been taken into account.
3

Analysis of Floor Space '"Wanted"

and "Available" by category of
Business Use
T h e total number of days
on
which t h e dally advertisements were
observed comprised 62 days. During
this period, advertisements for Busi
ness Premises appeared on 51 days.
The overall situation for
floor
space "wanted" and "available" by
category of business use is given
in Table 3. I t indicates t h e avail
ability of a very large floor space
of Business Premises In t h e City of
Colombo. T h e Office sector alone h a d
just over 1/3 million square
feet
available for
letting i n t h e twom o n t h period under study.
Table 3 also shows a large sur
plus of Office and Store space avail
able over wanted. I t further indi
cates t h a t property developers
in
vested more i n Office space t h a n in
Commercial and Stores space.
T h e situation by t h e different
m o n t h s of May, J u n e and
July
Is given i n Table 4. I t indicates
t h a t for Offices, the availability of
space when averaged per day, h a s
been over 5000 ft. for each of t h e
ECONOMIC REVIEW, J U N E / J U L Y

1981

23

Table 2

months.
I t also shows t h a t more
Commercial, Stores a n d Office space
have been wanted in May a n d less
so in J u n e a n d least In July,
i.e.
a downward t r e n d i n space wanted
is evident during t h e study period.
This may be d u e t o ready availabi
lity of space thereby negating t h e
need t o advertise.

CHANGES IN LAND AND RENTAL VALUES IN SELECTED POSTAL

ZONES OF COLOMBO
PEAK LAND VALUES
Rs. '000 per perch

COLOMBO
POSTAL ZONE

1979
150
15-50
80
30
20
20
80
25
8
15
150
150
150

Pre 1978
20
8
10
6
4
4
10
4
4
5
20
20
20

1
2
3
4
5
6
7
8
9
10
.11
12

"

RENTAL

VALUES

1979

Pre 1978
Offices (Per Sq. ft.)

Locational Analysis of "Wanted"

a n d "Available" Floor Space by
Category of Business Premises
T h e location of business
floor
space "available" a n d
"wanted" by
postal zone is given i n Table 5. I t
shows t h a t all zones have
more
business
premises available
than
wanted with t h e g a p for Offices be
ing most in Colombo 2 a n d 3. How
ever t h e r e is also a n exception
ir
Colombo 2 and 3 wherein more Com
mercial space is w a n t e d t h a n avail
able.
Table 5 further shows t h e d e
velopment of a n expanding Office
sector i n Colombo 2, 3 a n d 10. The
availability of Office space i n Col
ombo 10 being high owing to t h e
supply i n t h e Mallgawatte Secretariat.
T h e availability of Office space
in
Colombo 4, 6, 7 a n d 8 indicates an
expansion of t h e Office sector
be
yond t h e im m e dia te environs of Fort
and P e t t a h . F u r t h e r , t h e availability
of a large s h a r e of Office space in
Colombo 13, 14 a n d 15
Indicates

Rs. 0.50/2.00 to Rs. 10/Rs. 40

Houses (Per month)
Rs. 500/2,000 to Rs. 5,000/25,000
Commercial (Per Sq. ft.)
Rs. l/Rs.2 to

Rs. 10/ Rs. 15.

Chief Government Valuer, quoted in the Ceylon Daily News of 20

April 1979.
"Skyrocketing Land Values", ANCL Research Unit Article in Ceylon
Daily News.
Author's own knowledge.

Source:

c.

Table 3
BUSINESS FLOOR SPACE "WANTED" AND "AVAILABLE" IN THE PERIOD
12 MAY-12 JULY 1981
CATEGORY

AVAILABLE
(ft. 2)

WANTED
(ft.2)

OFFICE
COMMERCIAL
(Excl. Hotels but
incl. Restaurants)
STORES

59950
14400
5000

Source:

REMARKS

353441
12250

Available approx. 6.0 x Wanted

Available approx. 0.8x Wanted

84510

Available approx. 17x Wanted

Ceylon Daily News, Sun, Weekend & Sunday Observer.

12th May-nth July 1981.

CATEGORY

Table 4 BUSINESS FLOOR SPACE "WANTED" AND "AVAILABLE BY MONTH

May 1981
June 1981
July 1981
nth-list

OFFICE

(ft2)

COMMERCIAL
(Excl. Hotels but incl. Restaurants)
(ft.2)

WANTED
AVAILABLE
SURPLUS

31500
102910
71410

WANTED
AVAILABLE
SURPLUS

8000
8050
50

lst-30th

(5146)

(403)

STORES
(ft2)

WANTED
4000
AVAILABLE
20400
(1020)
SURPLUS
16400
Note: Figures in brackets represent floor space availability averaged
Source:

Ceylon Daily News, Sun, Weekend, & Sunday Observer.

TOTAL
STUDY PERIOD

lst-12th

18950
171956
153006

(5731)

9500
78575
69075

(6548)

59950
353441
293491

(5701)

6300
2200
-4100

(73)

100
2000
1900

(167)

14400
12250
/-2150

(198)

5000
84510
79510

(1363)

1000
53110
(1770)
52110
per day.

NIL
11000 (917)
11000

12th May-\2th July 1981.

Table 5 LOCATION OF FLOOR SPACE "AVAILABLE" AND "WANTED" BY CITY POSTAL ZONES
COLOMBO
POSTAL ZONE

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Unspecified
Total
Source:

24

OFFICE
Available
Sq.ft.

Wanted
% Sq.ft.

4225
76900
61416
20400
12750
8800
27200
17400
Nil
65500
11200
Nil
19500
14200
10950
3000
353441

1.9
1300
21.80 11250
17.30 11500
5.76
Nil
3.61
400
2.49
Nil
7.70
Nil
4.90
Nil
0.00
Nil
18.60
Nil
3.17
Nil
0.00
Nil
5.51
Nil
4.02
Nil
3.10
Nil
0.85 35,500
100% 59950

COMMERCIAL
Available
% Wanted
Sq.ft.
Sq.ft.

%
2.13
18.70
19.20
0
0.67
0
0
0
0
0
t

0
0
0
0
59.30
100%

Nil
5200
100
1800
Nil
Nil
Nil
Nil
Nil
850
2000
Nil
Nil
Nil
Nit
2300
12250

0
Nil
42.45 8000
0.86 6300
14.70
100
0
Nil
0
Nil
0
Nil
0
Nil
0
Nil
6.94
Nil
16.30
Nil
0
Nil
0
Nil
0
Nil
0
Nil
18,75
Nil
100% 14400

Ceylon Daily News, Sun, Weekend and Sunday Observer.

STORES

% Available
Sq.ft.

0
55.60
43.70
0.70
0
0
0
0
0
0
0
0
0
0
0
100%

Nil
4000
Nil
2600
27500
Nil
Nil
Nil
Nil
Nil
400
Nil
Nil
27500
11650
11360
84510

% Wanted
%
Sq.ft.
0
4.70
0
3.08
32.40
0
0
0
0
0
0.42
0
0
32.40
13.60
13.40
100%

Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
5000
5000

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100.0
100%

12th May12th July 1981

ECONOMIC REVIEW, J U N E / J U L Y

1981

t h a t t h e Office sector Is i n fact r a d i

ating from Fort in all directions of
t h e city.
I t is interesting to note i n Table
5 t h a t t h e availability of Business
Premises in Fort is negligible. Nor
are they being wanted. This situa
tion is
perhaps due to t h e
full
occupation and saturation of Busi
ness Premises i n Fort.
T h e availability of
Commer
cial floor space by postal
zones
indicates a concentration in
Col
ombo 2 and 11. The corresponding
wanted position reflects d e m a n d in
Colombo 2, 3 a n d 4. Thus, like t h e
Office sector, t h e Commercial
sec
tor too is spreading from F o r t and
Pettah to
Colpetty a n d
further
southwards.
T h e availability of Stores space
shows a traditional supply in Col
ombo 14 and 15. There is also large
otores space available i n Colombo
5. T h e stores space wanted
does
not indicate a specific
zone. I t is
therefore reasonable t o assume t h a t
Stores space is now being found out
side t h e city.
Analysis of Office Floor Space
"Wanted" a n d "Available"
by
Modular Sizes
I t was considered relevant
to
analyse t h e modules of Office space
"wanted"
and "available" in
the
city.
This situation during
the
study period is shown i n Table 6. I t
Is noted from t h e l a t t e r t h a t ,
for
both "available" and for '"wanted"
t h e most popular modules comprise
t h e (2001-5000) a n d (1001-2000) ft. (2)
size ranges. This reflects t h e scale
of Office units developing i n t h e
city.
Tabic 6
OFFICE SPACE "AVAILABLE" AND
"WANTED" BY MODULAR SIZES
MODULAR SPACE
SIZE (Ft?)

1-500
501-1000
1001-2000
2001-5000
5001-10,000
10,000+
Source:

NUMBER OF
ADVERTISEMENTS
"Available" "Wanted"

11
11
22
29
17
03

04
03
04
07
01
01

Ceylon Daily News, Sun, Weekend

Sunday Observer. 12th May
to,
ilth July 1981.

Analysis of Houses Offered as

Business Premises
The
advertisements
observed
during t h e study period revealed t h e
offer of 32 houses for use as busi
ness premises;
predominantly
for
Office use. This shows a continu
ing trend in the use of residential
ECONOMIC REVIEW, J U N E / J U L Y

1981

pemises for other

uses,
thereby
contributing towards a n increasing
housing shortage i n t h e city.
Policy Implications of t h e
Study Analysis
T h e analysis of business p r e m i
ses "wanted" a n d "available"
has
shown a remarkable degree of activi
ty during t h e study period. I t i n d i
cates t h a t t h e impact of u r b a n d e
velopment
policy h a s been
sus
tained over t h e p a s t
t h r e e years;
particularly In t h e property market.
The response of t h e supply p a r t
of business premises (as measured
by
"availability") h a s
overtaken
demand (as measured by "wanted").
This position may result i n a waste
of resources and m u s t hence receive
t h e attention of policy makers.
I n t e r m s of Office space,
the
popularity in t h e supply and d e
m a n d of small moduler size ranges
suggests t h a t small businesses yet
dominate t h e city economy.
Hence
such a situation m u s t be reflected
in investment promotion policy a n d
in the
corresponding
technical
specifications regarding intensity of
plot use.
The use of Houses as Offices con
tinue unchecked, t h u s further
aggravlng
t h e supply of houses for
actual residential use.
This s i t u a
tion is n e i t h e r suitable for t h e a p
propriate
development of Offices.
Hence policy guidelines to remedy
this aspect will be most timely>
T h e radial spread of Office spa
ces in all directions from Fort sug
gests t h e need for a n effective "Of
fice Location" policy as a n integral
component of a n overall urban deve
lopment policy
framework.
The situation of t h e Commercial
sector indicates a saturation
of
building spaces. T h e inactivity
is
reflected in t h e relatively small s h a r e
of space b o t h "wanted" and "avail
able". This situation is peculiar with
a n active u r b a n development policy
and needs closer
attention
and
policy
adjustments.
The Stores space sector i n
the
city appears
overserved.
Hence
policies t o guide t h e conversion of
such large floor space t o other a p
propriate uses need t o be fostered.
Conclusions
The conclusions arrived a t from
this study are as follows:
(I) The business premises market in
Colombo is quite active nearly
three years after the
initial
promotion of urban development
policies. Thus, 1/3 million sq. ft. of
Office space, 12,000 sq. ft. of Com
mercial space and 84,000 sq. ft. of
stores space were available for
letting in a 2-month period.

(il)

(ill)

(i)

The Office and Stores

space
supply (as measured by "avail
able" advertisements) is in large
excess over demand (as measur
ed by '"wanted" advertisements).
Commercial floor space is
In
short supply. Further, the mag
nitudes Involved arc also relative
ly small, suggesting saturation
levels.
The supply and demand of the
locations of business premises
have spread radially outwards In
all directions from Fort;
the
greater concentration being
in
Colombo 2 and in Colombo 3.

(v)

The business premises in Fort

appear to be saturated.
(vi) The utilisation of houses
for
business premises
continue on
a substantial scale.
Recommendations
The recommendations for action
comprise t h e following:
(i) It is recommended that conti
nuous monitoring of supply and
demand of different
categories
of business premises, be carried
out to guide investments
and
also to optimise use of resources
(particularly of building mate
rials)
(ii) The formulation of an "Office
location policy" as part of an
overall urban development poli
cy Is recommended.
(iii) It is recommended that a ban
on the future use of houses for
business premises be imposed and
a time limit be given to pro
gressively vacate existing houses.
This will encourage the deve
lopment of
an
appropriate
"Office Pemises Market" in the
city.
(iv) It is recommended that
the
State promotes developers
to
make available business premi
ses to small businesses in the
appropiate space modules.
BIBLIOGRAPHY
"Urban Development Authoity Law
No. 41 of 1978", Government Pub
lications Bureau, Colombo.
"Public Investment 1979/83, 1980/84,
1981/85", Ministry of Finance and
Planning, Colombo.
Ceylon "Daily News", "Sun", "Week
end", and "Sunday Observer", 12
May 12 July 1981, Colombo.
"The City", in Economic Review April
1977, People's Bank Publication,
Colombo.
"Colombo Urban Development",
In
Economic Review April,
1980
People's Bank Publication, Col
ombo.

25