COM­MER­CIAL PROP­ER­TIES SHINE

Ben­galuru, Mum­bai and Delhi out­per­form global ci­ties with 9.5% to 10.5% an­nual re­turns for com­mer­cial prop­er­ties, re­veals a re­port

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Mum­bai, Delhi and Ben­galuru have out­per­formed all other global busi­ness hotspots with 9.5% to 10.5% an­nual re­turns led by grow­ing depth of lease mar­ket and de­mand for com­mer­cial prop­er­ties, re­veals the sec­ond edi­tion of Knight Frank’s flag­ship global re­port, Global Ci­ties 2016.

While Ben­galuru topped the list with 10.5% an­nual yield, re­turns in ci­ties like New York, Sin­ga­pore, Lon­don, Tokyo and Hong Kong ranged be­tween 2.9% to 7% at the high­est.

Mum­bai and Ben­galuru are also fea­tured among the list of top five global ci­ties for fu­ture rental growth and are ex­pected to grow to nearly 22% and 16%, re­spec­tively. The grow­ing ap­petite for In­dian com­mer­cial prop­er­ties is in­di­cated by around 67% of in­vest­ments flow­ing into In­dian real es­tate from over­seas – the high­est among all other coun­tries.

The re­port pro­vides a com­pre- hen­sive out­look for real es­tate in 21 of the lead­ing busi­ness ci­ties and fore­casts for the next five years. This time around Ben­galuru and Delhi are also a part of the anal­y­sis apart from Mum­bai which was in­cluded last year.

Talk­ing about the find­ings, Shishir Bai­jal, chair­man and man­ag­ing di­rec­tor, Knight Frank In­dia, said the “In­dian of­fice mar­ket has been main­tain­ing the healthy trac­tion of 2014 and has clocked of­fice space trans­ac­tions of 18 mil­lion sq ft in the first six months of 2015 and we ex­pect the year to com­plete at around 40 mil­lion sq ft, which is the high­est since 2011. This is a record year for Ben­galuru which is ex­pected to trans­act of­fice space to the tune of around 12 mil­lion sq ft in 2015. Even though at an ag­gre­gate level, the va­cancy is at 17 % the chal­lenge is to get good qual­ity of­fice spa­ces across prime busi­ness dis­tricts, wherein va­cancy is in sin­gle dig­its. Due to a ro­bust de­mand from start-ups and e-com­merce, other than IT/ ITeS, BFSI and manufacturing, of­fice rentals are ex­pe­ri­enc­ing a sub­stan­tial surge. Go­ing for­ward, we fore­see de­mand to con­tinue out­strip­ping sup­ply.”

Dr Sa­man­tak Das, chief econ­o­mist and na­tional di­rec­tor of re­search, Knight Frank In­dia said, “While Ben­galuru, Mum­bai and Delhi are of­fer­ing the high­est yields glob­ally of 9-11%, we see a lot of in­ter­est from the in­vestor’s fra­ter­nity in the last one year which was pre­ceded by a pe­riod of pro­longed slow­down. Of­fice mar­kets across the top ci­ties of In­dia are con­tin­u­ing with its turn­around trend ob­served in 2014.”

He adds, “This is backed by ro­bust eco­nomic growth and fo­cus on in­fras­truc­ture and ease of do­ing busi­ness. How­ever, rentals across Mum­bai and Delhi are still be­low the 2007 peak lev­els, though Ben­galuru is an out­lier wherein rentals are 8% more. Cur­rently th­ese ci­ties are fac­ing an acute short­age of good qual­ity of­fice space on the face of ro­bust de­mand which is cre­at­ing an up­ward pres­sure on of­fice rentals that is ex­pected to scale up in the range of 6- 7% in the next six months.” In com­par­i­son to Lon­don and New York that of­fer rental yields of 4%, Ben­galuru, Mum­bai and Delhi lead the pack with 10.5%, 10% and 9% re­spec­tively Cur­rent of­fice rentals in Mum­bai and Delhi are lower than the 2007 peak lev­els by 17% and 19% re­spec­tively; Ben­galuru holds fort with an 8% growth Mum­bai and Ben­galuru fea­ture among the list of top five global cites in terms of fu­ture rental growth – ex­pected to grow to the tune of nearly 22% and 16%, re­spec­tively The Delhi–Mum­bai In­dus­trial Cor­ri­dor (DMIC) finds a place among the top five global in­fras­truc­ture projects – ex­pected to cre­ate new busi­ness clus­ters and gen­er­ate un­prece­dented em­ploy­ment op­por­tu­ni­ties The In­dian REIT sec­tor to give a fur­ther push to com­mer­cial real es­tate; could at­tract in­vest­ments worth $100 bil­lion in the next few years While Lon­don and San Fran­cisco wit­nessed the high­est rental growth for high-rise of­fices (sky­scrapers), Mum­bai has also shown a healthy trac­tion in high-rise rentals 67% of in­vest­ments into In­dian real es­tate is com­ing in from over­seas in­vestors – high­est among all other na­tions

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