Listen to the article
While many investors are focusing on tech stocks and startups, a phenomenal opportunity is quietly emerging in commercial real estate, particularly in India. Overlooking this sector means missing out on substantial returns and a chance to diversify your portfolio in one of the fastest-growing markets in the world. Let’s explore why India’s office space market should be on your radar.
But, Why Does India Stand Out?
In much of the world, commercial real estate is facing tough times, but India is a different story. One big reason, according to Knight Frank’s analysis, is the growth of Global Capability Centres (GCCs). India’s workforce has become highly skilled, attracting high-end research and development activities. This means there’s a huge demand for better and larger office spaces to keep top talent.
In 2023, 59 million square feet of office space was occupied, almost reaching the pre-Covid high of 60 million square feet. So looking ahead, the analysis says India is expected to see at least 7-8% growth in 2024, which could make it the best year ever for the country’s commercial real estate.
The recent surge in India’s office space market is nothing short of remarkable.
In Q3 2023, gross leasing activity in India’s top seven cities hit an impressive 16.03 million square feet. That’s a 26.4% jump from the previous quarter! This surge has pushed year-to-date (YTD) gross leasing to its highest levels since 2019, showcasing the market’s robust recovery and growth despite global economic challenges.
So, what does this leasing activity mean for investors?
Simply put, it signals a thriving market with a strong demand for office space. For investors, high leasing activity translates to several key benefits:
- Steady Rental Income: High leasing activity indicates that office spaces are being rented out quickly, ensuring a steady stream of rental income for property owners.
- Capital Appreciation: As demand for office space increases, property values are likely to rise, offering significant capital appreciation over time.
- Low Vacancy Rates: Robust leasing activity typically results in lower vacancy rates, reducing the risk of unoccupied spaces and ensuring continuous revenue.
- Market Confidence: Strong leasing numbers reflect the confidence of businesses in the economy, suggesting a stable and growing market that is attractive for long-term investments.
Leading Cities Driving Demand
Bengaluru, Delhi NCR, and Hyderabad are the powerhouses behind this growth. Bengaluru alone accounted for 23.7% of YTD net absorption, reinforcing its status as a major tech hub. Delhi NCR and Hyderabad follow closely, contributing significantly to the overall market dynamics. These cities are known for their strategic importance and vibrant business environments, driving both leasing activities and new office completions
What Sectors Are Leasing Office Spaces?
While technology firms remain the largest occupiers, the demand for office space is diversifying rapidly. Sectors such as BFSI (Banking, Financial Services, and Insurance), manufacturing, and consulting are showing strong leasing activities. This diversification not only stabilizes the market but also opens up varied investment opportunities where investors can benefit from rentals from different industry players.
Investors Are Catching On To The Benefits.
Despite the lucrative opportunities, commercial real estate has traditionally been out of reach for many investors due to high capital requirements and the complexities of property management. Fractional ownership is a game-changer that makes it possible for more investors to get a share of these high-value assets.
Fractional ownership democratizes access to premium real estate, enabling investors to participate in large-scale projects with smaller investments. Investors can spread their investments across different purpose-built properties like co-living spaces, office spaces, senior living, and locations, reducing risk and enhancing the potential for returns. This diversification is particularly beneficial in a dynamic market like India, where different regions and sectors offer varied opportunities.
Growing Confidence Among HNIs.
According to an industry survey, a staggering 60% of retail investors and 64% of high-net-worth individuals now prefer the fractional ownership model for investing in commercial real estate. This confidence has been bolstered by regulatory support from SEBI, adding a layer of security and legitimacy to the investment model.
Where are investors putting their money?
As per the survey, Bengaluru tops the list of preferred locations for HNI investors, with approximately 31% favoring it for fractional ownership investments. Pune follows with 24%, Mumbai with 22%, and Delhi NCR with 13%.
The Future Looks Bright For Investors
The future of India’s office space market is promising. The market’s resilience, coupled with diverse opportunities across various sectors and cities, makes it an attractive proposition for investors looking to diversify and capitalize on high-growth markets. As investors, you have a golden opportunity to invest in a high-value Grade A office space that ticks off all the boxes.
- Office space type: Tech Park
- Most in-demand Location: Bengaluru
- Biggest Leasing Sector: IT
Assetmonk is an alternative investment platform with a keen focus on structured quality deals for exceptional returns backed by real estate assets, one of the most profitable asset classes once only accessible to the 1%.
For investors aiming for stable returns and portfolio diversification, we present an investment opportunity in a secured, pre-leased property located in Bengaluru’s prime IT micro market, Whitefield. Discover more about earning rental income from an American MNC tenant by connecting with our advisors today
