Shoot­ing Star

Com­mer­cial real es­tate is boom­ing


While the res­i­den­tial real es­tate mar­ket is emerg­ing from a steep down­turn, the com­mer­cial mar­ket is boom­ing with high trans­ac­tions. Slow sup­ply of qual­ity of­fice real es­tate has meant low va­cancy lev­els, firm­ing up rentals. Re­cent re­ports un­der­line the growth, and point out that cor­po­rates are prob­a­bly pre­par­ing for higher eco­nomic growth to take hold in the com­ing quar­ters.

In April, real es­tate ser­vices and in­vest­ment firm CBRE stated that In­dia’s of­fice mar­ket has recorded ro­bust ac­tiv­ity over the past two years. In 2016, to­tal of­fice stock crossed 500 mil­lion sq.ft. By 2018, the num­ber is ex­pected to cross 600 mil­lion sq.ft., or a 20 per cent rise in two years. The com­pany fur­ther said that over the next two years, oc­cu­piers are ex­pected to spend al­most $48 mil­lion on leas­ing of­fice space while new com­mer­cial as­sets worth ap­prox­i­mately $6 bil­lion would be com­pleted. Col­liers, an­other real es­tate ser­vices com­pany, re­cently re­ported that of­fice take up in the sec­ond quar­ter of 2018 was at 12.6 mil­lion sq ft. The over­all ab­sorp­tion for the first half of 2018: 24 mil­lion sq ft. Ban­ga­lore ac­counted for the high­est share of ab­sorp­tion at 34 per cent, fol­lowed by the Na­tional Cap­i­tal Re­gion (NCR) at 28 per cent, and Mumbai at 14 per cent. The com­pany also noted the rise of co-work­ing spa­ces that now ac­counts for about 7 per cent share of leas­ing in the first half of 2018.

The av­er­age rents, Coillers said, may rise by 3-5 per cent an­nu­ally over 20182021 driven by premium build­ings in pre­ferred lo­ca­tions.

The other large com­mer­cial piece, ware­hous­ing, is shoot­ing up as well. Ser­vices firm JLL es­ti­mated that In­dia’s Grade A and B ware­hous­ing stock to­talled 140 mil­lion square feet in 2017. This would grow at a CAGR of 21 per cent to 247 mil­lion square feet by the end of 2020. Close to Rs 45,000 crore is likely to be in­vested in cre­at­ing stor­age fa­cil­i­ties across In­dia be­tween 2018 and 2020.

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