KARACHI: After a prolonged recession in the real estate market, commercial projects seem to be the first to witness some sunshine as prices of retail outlets have more than doubled over the past year – mainly on the back of a surge in demand.
Karachi alone has witnessed the opening of five shopping malls over the past few months. While many builders and developers have been struggling to sell luxury residential projects due to the thin ebb of investors, shops and showrooms have been lapped up by both: established business owners and budding entrepreneurs.
Real estate experts say this trend has gained momentum with the increasing awareness of benefits of engaging in personal business.
Difficulty in obtaining employment, the overall recession and comparatively low prices of shops are some of the other reasons that have apparently encouraged the younger generation to opt for starting something of their own. This has resulted in strengthening demand for retail outlets, particularly those located within shopping malls.
“Overseas Pakistanis are among the most active investors into commercial ventures,” informs Naeem Abbasi, a real estate dealer associated with one of the renowned builders of the country. “Most Pakistanis living abroad, more often than not, assign their relatives to search for investment opportunities here and then send the money to them to finalise the deal.”
He believes this is the reason behind the increase in remittances recorded in the recent past. In the first four months of this financial year (July-October), remittances touched $3.5 billion – up more than 13 per cent over the same period last year.
Abbasi added that the current situation in the global market has also convinced overseas Pakistanis to invest in commercial properties back home for the sake of financial security, should they lose their jobs or businesses in the present country of residence.
Property dealers highlight that overseas investors are more comfortable putting money into commercial properties since they are easily let out or taken care of by the mall management. In comparison, the fear of losing residential property to land-grabbers discourages investments in this segment, especially for those living abroad who cannot keep an eye on their investments.
Meanwhile, renowned developer Munir Sultan from Kay Kay Builders believes that an improved lifestyle was one of the major reasons for the rise in demand for commercial shops. He says that the emergence of local brands has also helped boost the demand for shops and malls.
Sultan informed that some major commercial projects are underway in Islamabad, Lahore, Multan, Sialkot and Bahawalpur.
The concept of ‘grand’ shopping malls was introduced to the country back in 1996 when Park Towers was inaugurated, followed by The Forum in 2000. Sultan said shopping malls help add value to products since the decor, display and overall atmosphere at a mall help play an integral part in making the sale.
Zeeshan Zaki of Saima Builders has an even simpler explanation. He says that the popularity of malls has increased since it has provided people a place to ‘hang out’.
“Earlier, people only visited amusement parks but now they throng to these malls that have also adapted accordingly to meet the needs of the growing number of visitors,” he said, referring to the food courts and play areas for children. “We are also planning to introduce a cinema in one of our projects.”
Many believe that the increasing popularity of malls has convinced investors to head this way now. “Existing malls are minting money as this helps increase the value of assets – higher rents promise better profits so the demand to buy shops is rising,” adds Zaki. This rise in demand eventually leads to higher prices.
However, this theory contradicts the rise in poverty level in the country where an ordinary citizen’s purchasing power is shrinking by the day owing to inflation. But builders shrug when asked to comment on this situation. “Pakistan presents two extremes in reality,” they say. “While the poor are suffering, the rich are getting richer – and that is the class we target.”
Then and now…
An informal survey conducted by The Express Tribune shows that a 15×12 roadside shop in a middle-income neighbourhood of Karachi was valued at Rs5 million in 2007-08, but the estimated cost of the same outlet is Rs6-7 million at present. A similar shop in an affluent neighbourhood of the city was valued at Rs6-7 million and is now priced at Rs10 million or more.
Meanwhile, 10×11 shops at shopping plazas boasting a fancy decor were valued at Rs1.9 million a year back, while the current price is Rs2.7 million. Prices of the same 10×11 shops at bigger projects were estimated at Rs4-5 million a year ago and have now increased to Rs6-7 million.