The Com­mer­cial Real-es­tate on Up­swing

Con­sid­er­ing the vig­or­ous de­mand for Grade-a of­fices, a lu­cra­tive op­por­tu­nity presents it­self to cor­po­rate de­vel­op­ers for busi­ness. Ka­mal Khetan, Chair­man and Man­ag­ing Di­rec­tor, Sun­teck Re­alty elab­o­rates.

Realty Plus - - Contents -

Ma­jor in­ter­na­tional cor­po­rates are ex­pand­ing their busi­nesses in In­dia lead­ing to enor­mous growth in In­dian com­mer­cial real es­tate. There also has been prom­i­nent surge in com­mer­cial re­alty due to strong pol­icy im­pe­tus by the Govern­ment and in­crease in fund­ing from in­sti­tu­tional in­vestors. Also, open­ing of REITS is ex­pected to fur­ther push as­set main­te­nance and greater liq­uid­ity for de­vel­op­ers.

the DE­MAND & sup­ply

The com­mer­cial re­alty mar­ket has been show­ing pos­i­tive signs in terms of de­mand from bank­ing and fi­nan­cial ser­vice in­dus­try (BFSI), Con­sult­ing, IT & Tech, Man­u­fac­tur­ing, Lo­gis­tics, Pharma and MNCS. Also, the in­fu­sion of more Pri­vate Eq­uity money into real-es­tate along with the con­cept of start-ups and dig­i­tal In­dia will drive the com­mer­cial mar­ket. Due to lim­ited avail­abil­ity of ready to move in grade A of­fice spa­ces, com­mer­cial space in key mi­cro mar­kets of lead­ing cities will al­ways have good de­mand and will be least im­pacted by eco­nomic down­turns.

chang­ing Mar­ket Dy­nam­ics

In­dia is at the cusp of a co-work­ing rev­o­lu­tion. In the age of mil­len­ni­als who be­lieve in the shared econ­omy con­cept, of­fice space has come a long way. With newer busi­ness av­enues open­ing up, of­fice space de­sign con­tin­ues to evolve cov­er­ing not only the struc­tural facet but also as­pects such as re­cre­ation fa­cil­i­ties and dig­i­tal­iza­tion of the of­fice.

the chal­lenges

Even though sec­tors such as IT, E-com­merce and BFSI, have been ma­jor growth de­mand driv­ers for com­mer­cial real es­tate seg­ment, they have re­cently been cut­ting down on their costs to bring in ef­fi­ciency and hence there would be a sharp de­crease in de­mand go­ing for­ward from these sec­tors. Owing to higher ad­di­tion of com­mer­cial spa­ces in Ben­galuru, Hy­der­abad and Pune, which are high de­mand mar­kets, the lease for com­mer­cial prop­er­ties may not ap­pre­ci­ate the way they have his­tor­i­cally. Ex­cept for the im­me­di­ate ab­sorp­tion due to de­ferred leas­ing from the pre­vi­ous year, ab­sorp­tion rate would be slow un­til the cor­po­rate and man­u­fac­tur­ing sec­tors ex­pe­ri­ence some tail­winds.

the growth Driv­ers

We an­tic­i­pate the com­mer­cial real es­tate seg­ment to see in­flow of in­vest­ments as REIT will be im­ple­mented. As a new trend, IT com­pa­nies who used to build/ buy spa­ces of their own have now shifted to leas­ing spa­ces for of­fices. This is an in­dus­try-wide change and as the global busi­ness for IT com­pa­nies im­prove, they may go­ing for­ward lease more spa­ces to ramp up op­er­a­tions.

De­spite the emer­gence of newer sec­tors like e-com­merce, lo­gis­tics, man­u­fac­tur­ing etc. it is ex­pected that the IT & ITES sec­tor along with BFSI back­end op­er­a­tions will con­tinue to oc­cupy a sig­nif­i­cant share in the over­all of­fice spa­ces pie. Ap­prox­i­mately 40 mil­lion sqft of new space will be added each year from 2017-19.

With the in­tro­duc­tion of REITS, the mar­ket will see higher liq­uid­ity in com­mer­cial as­sets and rentals look healthy. Rentals are likely to raise faster in low va­cancy mar­kets of Pune, Ben­galuru, Hy­der­abad and sub-mar­kets like Sub­urbs of Mum­bai, NH8 of NCR and SBDS of Chen­nai in a range of 6-8 per cent year-on-year. The tier II cities which are show­ing mo­men­tum in the ab­sorp­tion of spa­ces, should build more to meet the grow­ing de­mand.

Ka­mal Khetan

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