Unoccupied factory unit in a Karachi industrial estate.
Karachi’s industrial property market is facing a notable slowdown in factory rentals, primarily driven by the escalating operational costs for Small and Medium Enterprises (SMEs). Brokers across major industrial estates are reporting a decline in demand, as prospective tenants find the costs of running a business prohibitive. These rising expenses include expensive electricity, increased rents, higher labor and transport costs, and a general subdued market demand, prompting many entrepreneurs to delay their expansion plans.
The cost of renting comparable factory units has seen a substantial increase, reportedly quadrupling from around Rs100,000 to nearly Rs400,000 monthly in recent years. This surge places significant pressure on small manufacturers, making it challenging to secure new spaces. Industry observers note a shift in the market, with businesses now prioritizing utility costs, especially electricity capacity, over location when considering rental properties. Many are relocating for cost-management reasons rather than genuine expansion.
Financing constraints, coupled with the impracticality of relying on solar power for heavy machinery, further complicate the situation for manufacturers. While landlords are showing more flexibility in terms of payment and rent adjustments, these concessions often fall short of offsetting the high electricity tariffs. Some industrialists have also voiced concerns that brokers may be contributing to inflated rents through their commission structures, although brokers maintain that rents are dictated by prevailing market conditions and negotiations.
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