Cor­po­rate realty mar­ket starts 2016 on a pos­i­tive note

HT Estates - - HTESTATES - An­shu­man Mag­a­zine

The year 2015 has proved to be a good year for the cor­po­rate real es­tate sec­tor in In­dia. With the grad­ual re­vival in the US econ­omy, a large num­ber of business seg­ments in­clud­ing the IT/ITeS (In­for­ma­tion Tech­nol­ogy/En­abled ser­vices), bank­ing, fi­nan­cial ser­vices, con­sult­ing and re­search, saw growth in the coun­try. Of par­tic­u­lar im­por­tance for In­dia was the growth of shared ser­vices firms and e- com­merce com­pa­nies, which ex­panded their cor­po­rate space re­quire­ments across the coun­try’s lead­ing cities. While de­mand from cor­po­rate oc­cu­piers re­mained strong, the sup­ply of in­vest­ment-grade of­fice space re­mained a chal­lenge.

De­mand for cor­po­rate of­fice space in In­dia’s lead­ing cities firmed up in 2015, while mar­ket sen­ti­ments im­proved to a large ex­tent. A num­ber of lead­ing cor­po­rate oc­cu­piers moved into qual­ity of­fice de­vel­op­ments across lead­ing cities through­out the year; and a key de­vel­op­ment re­mained a spurt in of­fice space leas­ing by on­line re­tail firms, par­tic­u­larly in the Na­tional Cap­i­tal Re­gion (NCR) and Ben­galuru.

Ma­jor trends of 2015

Pre-com­mit­ments in un­der­con­struc­tion space and builtto-suit: The paucity of avail­able, qual­ity de­vel­op­ments saw cor­po­rate oc­cu­piers in­creas­ingly pre­com­mit to spa­ces in under-con­struc­tion projects across lead­ing cities. The qual­ity space crunch in prime mar­kets saw oc­cu­piers even con­sid­er­ing built-to-suit op­tions in 2015. Th­ese trends are likely to con­tinue and grow in forth­com­ing months.

IT/ ITeS drove de­mand, e-com­merce con­trib­uted sig­nif­i­cantly: The IT/ITeS, bank­ing and fi­nan­cial ser­vices, and en­gi­neer­ing sec­tors con­tin­ued to drive de­mand for cor­po­rate of­fice space across lead­ing cities in 2015. How­ever, the e-com­merce seg­ment also ac­counted for sig­nif­i­cant cor­po­rate of­fice space take-up dur­ing the year.

Sub­ur­ban/pe­riph­eral mi­cro- mar­kets at­tracted oc­cu­piers: Cor­po­rate oc­cu­pier leas­ing re­mained strong in the sub­ur­ban/ pe­riph­eral mi­cro-

mar­kets of lead­ing cities dur­ing the year, owing to the avail­abil­ity of large, in­vest­ment-grade of­fice spa­ces in th­ese lo­ca­tions. Th­ese dis­tricts would in­clude Gur­gaon and Noida in Delhi NCR; White­field and Outer Ring Road in Ben­galuru; Raidurga in Hyderabad, OMR in Chen­nai, Thane and Navi Mum­bai in Mum­bai; and Ra­jarhat in Kolkata, among oth­ers.

Of­fice space pur­chases: The year saw large oc­cu­piers in the IT/ITeS, fi­nan­cial and phar­ma­ceu­ti­cal sec­tors pur­chas­ing their own of­fice spa­ces, in­stead of leas­ing them. This has been a good in­di­ca­tor of multi-na­tional cor­po­ra­tions re­it­er­at­ing their faith in the In­dian econ­omy.

Rental val­ues wit­nessed an in­crease: Rental val­ues of cor­po­rate real es­tate across key mi­cro­mar­kets in the lead­ing cities saw a sig­nif­i­cant y-o-y in­crease due to non- avail­abil­ity of qual­ity readyto-move-in of­fice spa­ces.

Mar­ket Out­look: 2016

With the re­cent re­lax­ation in For­eign Direct In­vest­ment (FDI) guide­lines for In­dia’s real es­tate sec­tor, the gov­ern­ment has now

per­mit­ted 100% FDI under the au­to­matic route in com­pleted projects for the op­er­a­tion and man­age­ment of business cen­tres. This eas­ing of in­vest­ment re­stric­tions will now, hope­fully, help in the mon­eti­sa­tion of com­pleted com­mer­cial as­sets, in­creas­ing liq­uid­ity for most de­vel­op­ment firms in the coun­try. This is a tremen­dous op­por­tu­nity for for­eign in­vestors, and in the long run can sig­nif­i­cantly boost the share of for­eign cap­i­tal in In­dia’s real es­tate sec­tor.

Once in­vest­ments be­gin to flow into the sec­tor, the sup­ply of new, qual­ity of­fice space would still take some time to come into the mar­ket. Given the sus­tained de­mand for in­vest­ment-grade spa­ces from cor­po­rate oc­cu­piers, this would keep up the pres­sure on rentals across key of­fice dis­tricts in lead­ing cities through forth­com­ing quar­ters. An­other ma­jor chal­lenge that will need to be tack­led in the com­ing year will be the cre­ation of large scale, sus­tain­able in­fra­struc­ture across our lead­ing cities.

The growth and de­vel­op­ment of tran­sit hubs will also be im­por­tant for the long-term growth of

com­mer­cial realty in the coun­try. It will be­come im­per­a­tive for de­vel­op­ment firms, more­over, to en­ter into strate­gic pub­lic-private part­ner­ships with the state for at­tract­ing over­seas in­vest­ments into In­dia’s ur­ban cen­tres. Go­ing for­ward, cor­po­rate oc­cu­piers will eval­u­ate cities on the ba­sis of sus­tain­able in­fra­struc­ture and state gov­ern­ment poli­cies.

The In­dia of­fice mar­ket has wit­nessed a re­cov­ery on the back of an im­prov­ing do­mes­tic and US econ­omy; and the coun­try’s real es­tate has re­mained the pre­ferred des­ti­na­tion for the cor­po­rate oc­cu­piers in the IT-business process man­age­ment in­dus­try and the grow­ing e-com­merce seg­ment. For most global cor­po­rate of­fice oc­cu­piers set­ting up a business base in the coun­try, space takeup strate­gies will be tied in with their over­all cor­po­rate strate­gies, as they con­tinue to off-shore and send knowl­edge/prod­uct based work to In­dia. In­dia will con­tinue to at­tract multi-na­tional cor­po­rate firms owing to its tal­ent pool, scal­a­bil­ity and cost ef­fec­tive­ness. Pres­tige Es­tates Projects Lim­ited is propos­ing to pur­chase all se­cu­ri­ties held by the for­eign in­vestors in Ex­ora Business Park. Sit­u­ated on the outer ring road in Ban­ga­lore, Ex­ora is a tech­nol­ogy park leased to re­puted MNCs like JPMor­gan, Ju­niper Net­works, LinkedIn, Price­Wa­ter­house Coop­ers, Sch­nei­der Elec­tric and Bosch.

Sub­hash Bedi, chair­man, Ris­ing Straits Cap­i­tal, one of the in­vestors, said “We have been equity part­ners in this pro­ject for more than eight years, and have sup­ported it through the com­plete de­vel­op­ment and leas­ing life­cy­cle. The trans­ac­tion is an ex­cel­lent ex­am­ple of value cre­ation through a long term as­so­ci­a­tion.” AMB Group, which has come up with its com­mer­cial pro­ject AMB Selfie Square on Dwarka Ex­press­way, has an­nounced the sale of 95% of its com­mer­cial space in a short span.

Lo­cated right on Dwarka Ex­press­way in Sec­tor 37D, Gur­gaon, it of­fers modern fa­cil­i­ties and claims that in a 1,000 acre acre it will be the only com­mer­cial pro­ject which will cater to the mar­ket re­quire­ments of res­i­dents mov­ing into the area in the fu­ture.

“With in­creas­ing num­ber of MNCs and top In­dian com­pa­nies op­er­at­ing out of Gur­gaon, cou­pled with lim­ited avail­abil­ity of good com­mer­cial places in and around the res­i­den­tial area in Gur­gaon and Delhi, AMB Selfie Square on Dwarka Ex­press­way will be the most at­trac­tive des­ti­na­tion for ur­ban pro­fes­sion­als and fam­i­lies.” Gau­tam Sethi, MD, AMB Group, said. Vatika Business Cen­tre, which has just opened its sec­ond cen­tre in Ben­galuru and 13th in In­dia, has an­nounced plans to go global with its first over­seas branch to be opened very soon in Colombo, Sri Lanka. This will be fol­lowed by other new branches in Lon­don, Sin­ga­pore and Hong Kong.

The new business cen­tre at Cessna Business Park, Outer Ring Road of Ben­galuru cov­ers 17,000 sq ft of prime com­mer­cial space and of­fers 200 seats in var­i­ous com­bi­na­tions of up to 25 seater suites, four meet­ing rooms be­sides a con­fer­ence room. In ad­di­tion, it will of­fer vir­tual of­fice space pack­ages, meet­ing rooms, HD video con­fer­enc­ing fa­cil­i­ties etc to its lessees.

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