Big comeback for commercial real estate in India!
These days, the demand for retail space has been on the rise and is driving returns more than any other prominent business in cities around the world. Prominent Indian cities like Bangalore, Mumbai and Delhi have led the commercial property market in terms of annual rental yield. Reports have confirmed that these three markets have outperformed all other global hotspots with annual returns of 9.5-10.5%.
According to a recent global survey by a well-known real estate consultancy firm, Bangalore topped the list with an annual rental yield of around 10.5%, while cities like London, Singapore, New York and Hong Kong ranged from 2, 5 and 7% at the end. higher This is just one example showing that Indian commercial real estate is back in shape.
Bengaluru and Mumbai in the list of top 5 global cities
Yes, Mumbai and Bangalore are in the top 5 global cities list for future rental growth and are also expected to grow up to 22% and 16% respectively. Furthermore, 67% of the investments flow into the Indian property market, which is the highest among all other countries. This clearly indicates the growing appetite of the Indian commercial property market.
Healthy traction since 2014
With all the real estate happenings in India, it is quite evident that the office space market has had healthy traction since 2014. India recorded transactions of office space of approximately 18 million square feet. foot in the first six months of 2015, and by the end of 2015, the country completed the transaction of a whopping 40.21 million square feet. foot which is the highest since 2011. It should also be noted that, of 40.21 million m2. foot area, transactions of about 12 million square meters. foot happened in Bangalore.
Strong demand for office spaces
True, yields have shown strong growth, but current office rents in Delhi and Mumbai are still below their 2007 peak levels by 19% and 17% respectively. Bangalore is also an outlier here, where rents are more than 8%. Mumbai and Delhi are currently facing a severe shortage of quality space, which has created upward pressure on office rents.
This being the scenario of India’s commercial real estate, Real Estate Investment Trusts are expected to give further impetus to commercial real estate and the investments are also estimated to be worth $100 billion in the coming years. Despite the vacancy rate standing at 17%, investors and occupiers are still finding it difficult to get quality office space in prime districts.
Due to strong demand for office space from startups and large organizations, rents are experiencing a substantial increase leading to demand exceeding supply. Regarding the demand for office space, we can say that the commercial real estate market is making a strong recovery after being stagnant for about three years, with great offers in the pipeline and showing signs of recovery.