Construction Industry News
Indian commercial real estate is one day picking up steam as offices reopen. Most larger organizations are now reopening or implementing back-to-office programs. This represents a windfall for the office category, which was one of the fastest growing real estate segments before the crisis caused by the pandemic.
Positive sentiments in commercial leasing in India were also underlined in CBRE's recent survey. According to the CBRE report, total office rent in major Indian metropolitan cities in the second quarter of 2022 was 18.2 million square meters. ft., soaring 61%, compared to the previous quarter. The market revival was led by Bangalore, followed by Delhi NCR and Hyderabad
More than 80% of leasing in India is managed by medium-sized deals in the 10,000-50,000 square meters range. feet However, there has also been a pick-up in big deals (over 100,000 square feet). Many large corporations, including but not limited to ABB, Google, Amazon, etc., have been renting out large spaces in recent months.
There is a visible flight to high-quality A-deals in prime locations. Interestingly, buoyed by strong demand, rental rates have also risen in certain areas of Delhi, NCR, Bangalore, Chennai, Pune, etc. In certain micromarkets, quarterly rates have risen to 1.5%.
IT and technology companies are leading market drivers. Nevertheless, demand also comes from other key segments such as engineering and manufacturing, shared spaces, BFSI, research and consulting, etc.
Hot Investment ChoiceThe office segment in India is again a popular choice for the Indian investors association. While the housing market in India is believed to be risk-free, rental yields in the segment are low and usually range between 2-3%. Co-living is emerging as an attractive category, but it is still an emerging market.
This further makes the office segment the go-to-market asset class for investors. By investing in A-class assets in prime locations, one can easily enjoy increased returns in the range of 6-7%. In addition, the crypto boom is also declining, while the financial markets remain in the doldrums. This further makes investing in office space a lucrative deal.
In addition to investing in top quality assets, the strata sales market is also picking up quickly. Office buildings are generally very expensive, which limits investor activity. However, the sale and leasing of strata also allows investors with a range of INR 20-50 lacs to own assets in prime properties.
The concept of strata investment is already a popular concept in Asian economies such as Singapore and Hong Kong. In the near future, India will join the competition.
Because the demand for shared offices or flex offices is growing rapidly, it is another category where investors put a lot of money into it. Market experts believe that in the next 3-5 years, about 35% of rentals will be led by shared spaces. In addition to SMBs and start-ups, large enterprises are also opting for shared/flexible spaces as part of their strategy to control costs and enjoy flexible rental terms. As the demand for shared spaces is bound to rise, investing in the segment can easily yield returns of 8-10%.
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