According to a report by Cushman & Wakefield, private equity investments in the real estate sector during the first three quarters of 2019 rose to Rs 39,182 crore, up 19% from a year ago period. Bulk of it was bagged by commercial real estate segment including the office segment that remained the favoured investment asset class among investors. Institutional interest in rent-yielding office assets continued to be backed by strong occupier demand with 2019 slated to surpass 2018’s leasing numbers to a new historic peak.
“The commercial segment is thriving on the back of strong demand for office, as well as retail spaces. The low inventory level in commercial segment makes it an attractive bet and the scenario is likely to remain so for next 2-3 years,” said Ashish Bhutani, MD, Bhutani Infra. The Company is currently developing couple of commercial project in Noida-Greater Noida region and has received overwhelming response of the consumers.
Commercial segment has been the preferred segment of institutional investors for some time now and with the astonishing success of country first REIT, the interest in the segment is likely to continue. “The Blackstone Group backed Embassy Office Parks REIT, which got listed on the bourses in March, has provided decent returns to investors and has successfully opened up a new investment avenue. It is expected that more and more companies are likely to take this route. Already some of the companies have indicated towards it,” said Harinder Singh Hora, Chairman, Realistic Realtors.
Adding to it, Anupam Gupta, Sales and marketing Director, GBP Group, “Commercial properties yield higher rental returns than residential properties and the big benefit it offers to retail investors that it provides them an opportunity to invest in commercial properties that will earn higher rental income. With the success of Embassy REIT, retail investors are likely to be inclined towards it and that bodes well for the commercial real estate segment.”
Led by millennials and startups, who believe in shared economy, Co-working segment was one of the biggest occupiers of the Office spaces. “Shared offices spaces lower the cost of operation and hence, co-working will remain a preferred choice for emerging entrepreneurs,” said Ashish Bhatia, Founder & MD, India Accelerator, which mentors and nurtures startups.
Adding to it, Nakul Mathur, MD, Avanta India said, “The year 2019 for Coworking started with a host of players coming into this segment. A lot more private equity money came into the industry this year. The market has considerably matured this year as co-working was more adopted as an alternative to conventional lease by several large and small corporates. In the coming year, we expect more corporates to adopt custom made and operated offices. At the same time, Private equity investors are likely to invest primarily in profit-making operators.”
Besides the office arena, the Indian retail industry is also on a high. While, traditional and unorganised retail segment is still the dominant one in the country, but driven by technological intervention the organised retail is gaining ground at brisk pace. Accordingly, organised retail segment is expected to grow from $790 billion in FY19 to $1400 billion by 2024 and shopping malls are likely to gain the most from it.
“The retail segment including shopping malls is doing well. During the year, we started operation of Pacific mall at Dwarka 21, New Delhi and right on day one we started with 100% occupancy. We see the trend continuing over the next few years and malls are likely to continuing thriving. At the same time, malls need to adopt newer technologies and enhance customer experience,” said Abhishek Bansal, Executive Director, Pacific Group.
“During the year, we launched and delivered several projects in New Chandigarh, Ludhiana, Faridabad and Lucknow in both commercial and residential segment. We also launched Omaxe Chowk in association with North Municipal Corporation of Delhi (N-MCD) at the iconic Chandni Chowk. The project is the first organised commercial offering in the area encompassing retail, food court as well as multi-level parking spaces. The response has been overwhelming,” said Mohit Goel, CEO, Omaxe Ltd.
The growth of malls is not limited to metropolitan cities as malls in tier II and III cities are also clocking decent business with several brands registering their presence in these markets. “In absence of major recreational facilities, malls have emerged as the go to choice for the residents of tier II cities. As such, many well-known and reputed brands are increasingly looking to expand in these cities,” said Uddhav Poddar, MD of Rajasthan based Bhumika Group which is developing malls at Alwar and Udaipur.
According to a recent report, tier II and III cities accounts for 25-30% of mall spaces and it is likely to increase further in the future. At the same time, the metro cities continue to hold its own charm and sway, a reason for which many developers are extremely hopeful.
“India is a huge market and many trends can co-exist simultaneously. The malls and hi-streets located in tier II and III cities are performing great, but so is the case in metro cities. The footfalls at most of the hi-street and malls are increasing day by day and there is no reason for trend to change over the next couple of years. In fact, the best time for hi-street, malls and retail sector is yet to arrive,” said Vikas Bhasin, CMD, Saya Homes.
With experts of commercial segment including office space, retail and malls all expressing confidence of robust 2020, this may be a year to watch out.
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