Key determinants of rental rates for A-grade office space in the Colombo-Central Business District: A tenants’ perspective

Abstract

Property investors and tenants face complicated decision-making due to rent variations among purpose-built office buildings in the same market. While rental discrepancies are accepted as normative across economies, recent trends show the Asian office market experiencing notable growth and instability. This trend is also observed in Colombo's Central Business District (CBD), and thus far, a comprehensive analysis of the drivers behind the fluctuations is lacking. This study aims to fill this gap by examining the determinants of rental rates for A-grade office spaces in Colombo from tenants' perspectives through market research. Factors such as building age, occupancy restrictions, maintenance costs, unit size, and additional and green features emerge as significant influencers while building brand and additional and green features play a moderating role. The study’s findings contribute to the growing body of knowledge that can be used to develop and sustain a healthier office market industry.