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Sri Lanka firms eye converted residences to cut costs amid slowdown

ECONOMYNEXT- Some Sri Lankan firms are likely to move from high-end office buildings to residential units within or outside Colombo as they get hit with a sluggish economy and political uncertainty, a property developer said.

"Some companies aren’t getting high revenue with the current economic conditions," RIL Property Plc Executive Director Hiroshini Fernando said.

"Last year was very volatile. due to political conditions. This year; it’s hard to predict anything in our economy."

"Companies would become conservative in their spend," she said. "Some may go for residential units which are converted to office spaces."

Some may even move into Colombo’s suburbs, Fernando said.

RIL Property develops high-end ‘Grade A’ office space.

Fernando however said most firms are used to the prestige linked to high-end office spaces, and would try to remain in them, as they have better usable areas, security, common facilities, environment, ambiance, and location.

"A client, even if they move out, would need to ensure that these integral services are present to continue their business," said.

"So there are very few available options for them to move to."

However, there are likely to be less firms willing to move up to Grade A spaces from current lower grade offices, she said.

"Though they would like to move into Grade A offices, the affordability is now less," she said.

There has been a long-standing requirement for around 500,000-1,000,000 square feet of Grade A space in Colombo, Fernando said.

Cutting rental prices for offices is not an option, she said, as Grade A service providers have to maintain service standards.

Fernando said her clients are so far happy with the services provided, as the flagship Parkland property has 100 percent occupancy.

Parkland 1, formally known as the READYWEAR building, was recently refurbished and expanded with part of the funds raised through a listing on the Colombo Stock Exchange, and is now 70 percent occupied, she said.

Sri Lanka’s central bank last year printed money to artificially lower interest rates, de-stabilizing a soft-pegged exchange rate regime triggering two runs on the rupee, which ended with the currency collapsing to 180 from 153 to the US dollar at the beginning of the year. (Colombo/Mar28/2019-SB)