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Epc World|November 2019
With investment options narrowing, commercial real estate is fast emerging as the hottest destination to park in. In the last few years commercial real estate has give good rental returns of 6 to 11 percent. With a recession in and investment options fast disappearing, commercial real estate seems to be the best bet.

Commercial real estate plays a very important role in the development of the nation. In fact it is one of the indicators to judge the growth of the nation. The more commercial real estate comes up, the more blue collar jobs it will offer. Unlike the housing sector, which is witnessing a downward demand in spite on government intervention with offers of tax sops, friendly policies and regulations and tailor made home loans; the commercial real estate is on an upswing. “The Government’s policies and measures with regards to real estate are largely about rescuing the ailing housing sector. Commercial real estate, on the other hand, is already doing very well and does not really require any ‘damage control’ interventions. This is not to say that office real estate developers do not have their own issues, but these are not comparable to the ones being experienced in the housing sector,” says Anuj Puri, Chairman, ANAROCK Property Consultants. As per ANAROCK data, approximately 11 million square feet of office space was absorbed in Q1 2019, led by Bengaluru and followed by Mumbai, Chennai, and Hyderabad. Supply addition in Q1 2019 rose by nearly 11 per cent on a yearly basis to touch nearly 7.5 million sq. ft. in the first quarter across the top seven cities.

Anuj Khetan, Director, Vijay Khetan Group, agrees with the recent development in commercial real estate and opines “While the real estate sector has been facing challenges, the commercial segment has been moving northwards. There are several structural changes that have been underway in the commercial real estate segment in the country since the past few years, the most important ones being the disruptive impact of technology and the evolving relationship between occupiers and developers. The latest Reserve Bank of India data has shown a positive trend where lending to the commercial estate has risen to 15 percent by July 2019, as compared to just 4.2 percent of the last year. The lending space left by NBFCs has been taken over by the banks. The demand from the logistics and hospitality sectors is strong. We see better prospects for this segment in the long-term, as the momentum will sustain. A flow of foreign direct investment in this segment coupled with demand for office spaces by MNCs is also driving growth. This segment too will soon see a phase of consolidation and REITs will be its future”.

The recently released report by JLL India states that the office market across the top seven cities (Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata) in India has continued to grow. The report further informs nearly 12 mn sq ft of Grade A office space was completed and 11 mn sq ft absorbed during the last three months. The total office stock in Hyderabad burgeoned by more than 5 mn sq ft in a single quarter to reach Pune and Chennai levels in record time. Citywise, Hyderabad’s climb in the country’s office market continued with net absorption in the city overtaking all others in Q3 2019. With net absorption of nearly 10 mn sq ft in the first nine months of the current year and 4 mn sq ft in the third quarter itself, the city contributed 36% to the total absorption in Q3 2019 as compared to 12% in Q3 2018. The jump in net absorption is attributable to the continued expansion of major IT and BFSI occupiers like Microsoft, Xilinx, MathWorks, JDA Software and Synchrony Financial combined with a significant take up of Grade A spaces by co-working players like WeWork.

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