India Predicts Bright Future for its Commercial Real Estate
International corporates continue to capitalize on India’s skilled knowledge workers
International corporates continue to capitalize on India’s skilled knowledge workers.
According to a survey by The Economist, the Indian economy grew at a year-on-year rate of 7.7% for the quarter ended March 2018, making it the fastest growing economy among 40 nations.
Buoyed by gains in industrial manufacturing, corporate investment and consumer spending by a rising middle class, the World Bank estimates that India’s nominal GDP of $2.597 trillion makes it the sixth largest global economy, just ahead of France’s $2.582 trillion. Assuming a more conservative growth rate of 7%, India’s GDP could double by 2029.
This growth in GDP is being led by the services sector, which continues to pilot the increased demand for office space.
The commercial real estate market remains a strong beneficiary of India’s economic growth. Foreign and domestic companies continue to steadily invest in India’s skilled labour and business-friendly investment climate by committing to large office spaces nationwide.
According to real estate services firm Colliers, the pan-India office space absorption witnessed a 23% year-on-year increase of approximately 11.4 million square feet in the first calendar quarter of 2018. Colliers believes the sector is likely to remain robust in 2018 with other sectors such as technology, manufacturing and finance driving office space growth.
In addition, Colliers also believes that Grade A vacancy rates in Bengaluru, Pune, and Chennai are likely to remain at a low of 6-9% through 2020. A deeper analysis of the quantum of absorption shows that Bengaluru leads the domestic office market with 34% absorption of the total leasing volume, followed by the National Capital Region (NCR) at 26% and Pune at 16%.
A handful of dominant large office owners such as Embassy Office Parks, K Raheja Corp, DLF and Brookfield will continue to benefit from this increase in demand.
Embassy Group in Bangalore has been a pioneer for more than a decade in the development, ownership, operations and management of Grade A integrated office parks in both, Bangalore and Pune. They provide high-quality office space solutions to numerous international corporates looking to leverage the scale and skill of the Indian employee base.
Embassy’s integrated business parks in Bangalore differentiate themselves by providing support amenities such as hotels on the park to meet the demands of corporates. They also provide green energy through their own dedicated 100MW solar power plant.
With over 160+ clients, and numerous Fortune 500 companies situated at these parks, Embassy Office Parks has always maximized their deep relationships with its diverse pool of corporate tenants.
Growing and adapting to their client demands along with the changing industry dynamics, their existing tenants have been long-term and spreading across various sectors.
Recognizing the need for flexible office-space solutions, Embassy Group recently entered into an operating agreement with WeWork, the leading global co-working office solutions provider.
One of the other key differentiators in Embassy Office Parks’ offering is the integrated ecosystem the Company offers.
This includes hospitality, food courts, retail, parking spaces, connectivity, and 24/7 security, among other facilities. Embassy Office Parks integrated parks also runs the “Energize” programme which is a park user outreach programme that aims at engaging tenant employees.
The range of events the programme offers include Sports, Cultural, CSR and Lifestyle.
Owing to the demand for office spaces in India, the lease transactions in grade A building were recorded at 1,300 in 2017 as opposed to only 820 in 2013.
As shown by JLL India, this growth accounts to whooping 58%. “Indian office transaction is at an interesting cusp. We have been experiencing a growth in overall leasing activities.
While net absorption has remained stable for the past few years, we expect it to be at around 32 million sq ft by end of 2018 and be close to 35 million sq ft in the subsequent two years till the end of 2020,” said Ramesh Nair, CEO and Country Head, JLL India.
With demand expected to remain robust over the next 2 years the shift would continue to be towards Grade A Office Parks that offer quality and amenities to the tenants. The future looks bright for Indian commercial real estate.
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