DHA Commercial Connotations in 2020
DHA Commercial Connotations in 2020 will reflect upon what the author believes would be trends in 2020, guiding potential investors to make an informed decision. This article would reflect on the brief history and the potential gains in 2020. This would include guidance not only from an investment point of view but also for people looking to stable rental income as well as end users to make their own retail, offices or conduct any other business activity.
Commercial plots were relatively stable in 2019. Prices in some areas even went down. Mostly possession areas remained stable. Speculative areas have witnessed a dip in prices. In Lahore a long awaited ballot of DHA Rahbar took place which will be discussed later. More people were interested in areas with rental yields.
In 2020 there are some news of another long awaited possession which will also be discussed in the article. It has been a buyer’s market for commercials in 2019. The prices in some areas are expected to grow.
Phase 1 to 4 has seen an increase in prices of built up buildings with rental yield. Plots on the other hand especially 2 marla sector shop plots have seen an increase as well. I believe as people are more inclined towards rental perspective this trend will continue. And we will witness a further increase in prices. The commercial rental yield in DHA varies from 0.3% up to 0.45% per month. It is however, compensated by the increase in the value of the commodity. An overall gain of 10-18% is witnessed including the rental income.
Prices of 2 marla shops will remain relatively stable in my opinion. The reason being an exponential rise in prices over the past two years has taken place. This has been mainly due to the economic situation of country as we have witnessed a major increase in small commercial investors. The economic situation is expected to get better in 2020 for Pakistan as per the government’s own economic indicators. Another reason for this would be the low rental yield as the prices have gone up. In some cases it would be wiser to buy a house and put it on rent rather than a sector shop.
Four and eight marla buildings with decent rental yield will at least increase in prices by 10% which would be directly proportional to the rental increase in these commodities. It can go up further as per the demand in the market.
Phase 5 had seen an increase in the commercial prices of CCA 1 next to Penta Square in the first quarter of 2019. From thereon, the prices are stable. Because of the high value of buildings, it is expected that the prices might not increase further and will remain relatively stable. If the overall market starts performing only then can you expect the price to go up further. As it is one of the most expensive commercial areas of DHA Lahore, the price is expected to remain stable unless a boost in the overall economy of the country.
CCA 2 on the other hand is expected to rise but that is proportionate to the demand of corporate office(s). As it is quite cheaper compared to the previously discussed CCA 1. I believe the chances of increment in price are more. It might not be suitable for the retail sector right now because of the low footfall at the moment. Another development is of the Medical Center in the vicinity. This could increase the footfall and see a superior increment in price of this commercial area. Pharmacies, labs, and relevant businesses can open up depending upon the facilities that the medical center will provide.
Phase 6 has witnessed different variations in different sectors of commercial areas. Main Boulevard or MB commercials on the main road in the first three lanes have been stable, whereas the plots at the back of not only these three lanes but further on have witnessed a slight decline. MB plots apart from these first three lanes have also witnessed a slight decline in prices including the 8 marla plots near P block Phase 7.
CCA 1 has also witnessed a slight decline in prices whereas the plots on premium locations have been relatively stable. CCA 2 on the other hand has witnessed a sharp drop in prices. This is also applicable to the L block commercial area. A block plots have been stable and witnessed a slight rise in prices in the old cutting. The new cutting on the other hand with the provision of a huge mall has also seen a decline in price.
This was the history, how we perceive these commercials in 2020 is another perspective. In my opinion as the MB plots are already high in value and will witness little or no increase. The plots at the back might also see a slight increase in their prices. CCA 2 will also see a rise, whereas CCA 1 would still be relatively stable. L block commercials might not witness any movement and there are chances they might go further down a bit. A block commercials might see a rise in prices if the development of the proposed mall is started.
These predictions are based on the micro economic factors such as demand for rental property in different areas, the level of population increase in the area, footfall in these areas, competitive or alternative options in the vicinity e.g. L block vs Raya commercials although one is eight marla and the other four marla but they will have an impact on one another. As all eight marlas are booked in Raya the L block commercials might be the next big thing but not in the near future. The success of commercial area depends not only on the footfall but also the purchasing power of the community. The purchasing power of a community dictates the willingness to pay rent for tenants.
Phase 7 has witnessed a sharp decline in prices over the past one year. Underpriced commodities are bound pick up a little such as CCA 5 and CCA 3. Whereas the higher priced commercials will remain stable in my opinion. There are 5 commercial areas and rumors are there might be more. Such a huge number of commercial sectors is not required by Phase 7 at the moment. You cannot extract a decent rental income as of now. It might be suitable for someone looking to open up his/her own office. Phase 7 residential has started picking up pace because of its low value. There are a lot of houses being built. 3-4 years down the line there would be a need of commercial activity. Commercial activity is dependent on the number of residents in the vicinity, therefore, I believe 2020 will witness a slight rise in underpriced commodities while the other areas remain constant.
Phase 8 is a huge sector with a lot of commercials ranging from ex-Park view, Ex-Air Avenue, Z block commercials, CCA 1, CCA 2 and Broadway. The prices have dipped in 2019, the extremity of the dip depends on the location.
CCA 1 and CCA 2 have witnessed a decline in prices, in CCA 1 it wasn’t that sharp compared to CCA 2. These would see stability or a slight decline in 2020. Broadway on the other hand would start picking up pace. The reason for Broadway picking up pace is the number of new constructions that are taking place. In 2019 Broadway also witnessed a sharp decline in prices. This was mainly due to the high supply in the area. As most have been sold and are currently being sold. I believe as the DHA Business Hub nears completion, it will have a positive impact on the general area.
Phase 8 residential plots have started picking up pace which means this will also impact the commercial prices in the near future. CCA 1 and CCA 2 are situated within T and W blocks respectively whereas Broadway has the easiest approach out of them all therefore, the rise in price is expected.
Z block might be given possession in 2020 and we will witness a jump in the overall prices of the area. Z6 commercials will give higher returns compared to Z2 commercials as the first point of entry is the Z6 area. Ex-Park View will witness a further dip in prices along with Ex Air Avenue as the demand for commercials is not that high plus Ex Air Avenue has a high number of commercials just like Phase 7.
Phase 9 and 9 town have witnessed a decline in prices in general. Phase 9 might not pick up unless given possession. Phase 9 Town might witness an increase in CCA commercial prices only if the population in the area grows at a good rate. This is expected that the general population would grow at a good pace. Another unexpected anomaly could be that they give possession to E block commercials, this would see a decline in prices of CCA and with the huge number of commercials in E block the price would be stable or might witness a slight decline. This is a narrow window. Overall I believe buying in CCA would benefit the purchaser.
Phase 9 commercial plots might witness a further decline in price. This is due to the lack of interest in the area as of now. The interest will only develop if there is news of possession.
Note: This is the author’s expert opinion, other macro and micro economic factors do play a part in the fluctuations of price. Plus the willingness to pay for a certain commodity is determined not only by purchasing power of the public as a whole but also the supply in the area, the rental output, footfall, artificially created demand(s) from time to time along with the real demand.
MBA Finance (Cardiff, UK)