Boston, MA -- (ReleaseWire) -- 05/29/2014 -- We have updated our forecasts for Pakistan's commercial real estate sector, moving our shortterm focus on to 2014 and 2015. Retail is the only sub-sector for which we are forecasting an increase in rental rates in the short term.
The security situation and economic uncertainty continue to be concerns regarding investment in commercial real estate and business expansion in Pakistan. However, we believe that there is significant potential for the sector should these concerns alleviate. Pakistan's strategic location could stand it in good stead, were the political and economic situation to improve enough to attract significant international investment.
The bright spot in the Pakistani commercial real estate landscape is retail. Organised retail in the country is growing from a very low base, and is currently restricted to the main cities. Rising disposable incomes and a growing taste for Western-style shopping should support the sub-sector's growth in the short and long term. In the short term, the biggest downside risk is the security situation, which is causing some companies to relocate from violence-prone areas, and others to hold off on investment or expansion plans.
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Transparency in the real estate industry is also an issue, as is a suitable investment framework. The Securities and Exchange Commission of Pakistan (SECP) is reviewing the country's real estate investment trust regulations, with a view to making it easier and more attractive for companies to list.
Despite the market's drawbacks, some areas of Pakistan's real estate market are thriving, and recently we have seen the launch of new real estate websites and real estate expos, mainly residential-focused but indicating the strength of interest in the country, both local and international.
Islamabad, the capital, sees much demand from government and international organisations, but it is afflicted by oversupply in the office market, and also by the departure of a number of NGOs.
We expect oversupply to remain an issue in some areas of the office market, and point to security concerns that have led businesses in Karachi to relocate to more secure premises, or even to other cities. However, the office market across the country will continue to be supported by a trend for mixed-use facilities. In Lahore, the cultural capital of the country, we see particular scope for growth in high-end retail real estate.
- Progress continues on the World Trade Center (WTC) Islamabad. The centre will include four shopping floors, an office section and a five-star hotel.
- In Lahore, the Gulberg Galeria, with three floors or retail space and three of office space, was completed in late 2013. The Ali Trade Center, which will also have a retail component, will open in 2016.
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