MUMBAI: Global investors continued investing in Indian real estate despite slow sales momentum in residential segment as demand for office properties sustained and offered them superior returns.
Indian real estate attracted over $6.06 billion investments in 2019 led by office segment fetching more than 40% of the total funds deployment. Among the key markets, Mumbai dominated the investments into office sector during the year followed by the National Capital Region (NCR) and Hyderabad, showed a CBRE South Asia report.
Gross leasing activity, according to the report, grew more than 25% from a year ago to cross 60 million and touch a historic high of almost 61.6 million sq ft by the end of 2019. Bengaluru followed by Hyderabad, Delhi NCR and Mumbai, dominated office leasing on an annual basis, together accounting for almost 75% of the overall space take-up.
“In 2019, policy reforms across various sectors acted as a business sentiment booster, leading to tremendous improvement in India’s Ease of Doing Business Ranking. According to the World Bank, India ranks 63rd among 190 countries on the Ease of Doing Business index; the ranking is anticipated to improve further in the coming years, backed by progressive government policies. This helped in retaining the buoyancy of the office sector in 2019, where demand was driven by global multinationals, domestic firms and a healthy supply infusion in cities such as Hyderabad and Bangalore,” said Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa, CBRE.
He expects office stock to grow to a billion sq ft by the end of 2030 and flexible space to turn mainstream – accounting for 8-10% of the total office stock.
In 2019, the share of the tech sector in overall space take-up rose from about a third in 2018 to almost 40%; with overall space take-up by such firms rising by more than 45% on an annual basis. This growth was primarily driven by global multinationals, which accounted for more than 70% of the overall space take-up by tech firms this year.
The share of research, consulting & analytics firms has increased to 5% in 2019 from 4% in 2018. The collective share of sectors such as engineering & manufacturing, BFSI, e-commerce and research, consulting & analytics, dropped from almost 36% in 2018 to 31% in 2019.
Many corporate entities continued to show interest in SEZ spaces despite the upcoming sunset clause deadline; as a result, SEZs accounted for about one-third of the leasing activity in 2019. Occupiers continued to opt for flexible spaces, with the share of the segment rising from 12% in 2018 to about 14% in 2019.
“Several occupiers are likely to adopt newer workplace strategies to realign their portfolios by trying to find the right mix of agility within their core workplaces along with adding external flexible options (especially managed spaces). Tech and workplace transformation will continue to be high on occupiers’ priorities, thus putting employees at the epi-center of all real estate strategies,” Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia.
He believes office assets would continue to be a part of future REIT portfolios in India, thus further boosting investor and developer interests going forward.
During the year, occupiers continued to future-proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. In 2019, more than 20 million sq ft of pre-leasing activity was recorded mainly in Bangalore, Hyderabad, Pune and Mumbai.