Susantha Amarawickrama

This paper examines the Grade A office property rent determinants and their general characteristics. While research on Grade A office properties largely focuses on developed countries, there is limited evidence emerging from Sri Lanka and other developing contexts as well. In particular, the identification of rent determinants for Grade A commercial office real estate remains unaddressed, especially as the country is currently at a critical stage in advancing sustainable commercial real estate development. Addressing this gap, the present study employed the Relative Importance Index (RII) method, together with descriptive data analysis, to identify and rank the determinants of Grade A office rents in Colombo based on the survey of the viewpoints of experts. RII analysis validates that the top ten drivers of Grade A office rent are locational attributes such as property location, distance from the major town center, development zone, locality and other characteristics such as parking, building condition, floor size, business type, green building certificate and facilities, and office demand in the area. The findings of this research enhance practitioners’ understanding of Grade A office characteristics for informed planning and development, while also supporting academics in analyzing the relative importance of key determinants in office development decision-making.

Purpose: This paper examines rent determinants and their relationship with commercial office property rents.Design/methodology/approach: The method adopted in this study differs from that of previous studies on this topic. Firstly, based on the survey of the viewpoints of experts, Relative Importance Index (RII) analysis was used to identify rent determinants and to rank and ensure their relevance and validity in the Sri Lankan context. Secondly, sampling of data related to 115 office properties collected from property tenants and landlords located within the central built-up area of Colombo City was conducted using a multi-methods approach to carry out an objective hedonic analysis of office rents.Findings: This research utilizes RII and hedonic models to provide insights into determinants and relationships. Both analyses confirm that the three top drivers of commercial office rent are distance from the major town center, availability of parking space and the condition of the property. In addition to these three factors, hedonic models reveal that the age of the property and the availability of a conference hall also play a relevant role in explaining office rents. Given the disparities in the findings of the two methods, further examination was able to confirm that factors such as distance from the major town center, parking availability, age of the property, presence of a conference hall, building condition, floor size, business type and type of building are likely to influence commercial office rent. These findings reflect elements such as the quality, newness and better facilities of different office properties.Practical implications: This systematic study and analysis of office rent for the guidance of real estate investors can support sound investment decisions, potentially leading to more financially sound property development, reduced public debt levels and improved public-private financing. Further, the research findings offer valuable insights to real estate investors, developers and planners regarding location decisions for office development quality enhancements in future office developments.Originality/value: This research provides fresh insights into the local scale office market, an area where limited evidence currently exists. Further, the methodology adopted provides evidence that hedonic analysis, supported by a multi-method approach, can mitigate the subjective judgments made by professionals.