Commercial Real Estate has shown some promising growth in India so much so, that it is projected to contribute a hefty 13% to the country’s GDP by the year 2025. It has also been speculated that there will be growing trends of investments in the CRE market of India in the foreseeable future.
The CRE market of India is divided into the following sectors-
Naturally, the growth of such sectors is dependent on their locations. The major CRE hub of the country are cities like Bangalore, Chennai, Delhi, Hyderabad, Mumbai, and Pune. The CRE market has grown with flair in these cities.
Bangalore Commercial Real Estate Market Overview
With the industrialization and urbanization boom of the last decade, the city of Bangalore soon came in the spotlight of being an ideal place for IT companies and magnum business houses to set up camp. The rising accumulation of the IT sector in the city has led it to become the technological hub or ‘Silicon Valley’ of India.
The rise of the IT sector brought along job opportunities for the youth and in turn, an explosion in the CRE property market. Bangalore stood at 5th position on the list of top fastest-growing CRE markets in Asia as per the economic times report. This comes as no surprise as the city brims with a number of CRE opportunities. Home to a tribe of topmost IT companies, ideal property areas, pleasant climate, good transport connectivity, luxurious lifestyles, and immense business opportunities, the city is any CRE investor’s dream.
This dream is slowly but steadily turning into a reality as more and more CRE properties are being utilized for business and investment opportunities.
Before talking about CRE investment strategies in Bangalore, it is essential to discuss the CRE potential of the city which lies in the progress of its sectors.
Commercial Real Estate Sector Analysis in Bangalore
The cumulative performance of the CRE market of Bangalore paints a pretty picture. The rising demand for corporate buildings and rentals has helped the commercial real estate of Bangalore to make a giant leap forward towards progress and economic growth. But is the picture still pretty when looked up closely? Let’s find out.
The office sector in Bangalore is perhaps the most significant contributor to capital generation in the commercial real estate market. With the pooling of IT companies like Infosys, Wipro, TCS, IBM, Oracle, Capgemini, etc. in the city, Bangalore has become the center stage for business professionals and technological experts.
This gives rise to the demand for creating optimum workspaces and company buildings. Consequently, there is the creation of more employment opportunities that bring the young employees to the city and in turn, the creation of more housing and residential spaces that can either be sold or put on the lease. Thus, the office sector has shown the most growth among all the other sectors and is probably going to proceed on an upwards trajectory with time.
The major industries operating in Bangalore and the state of Karnataka are
- Cement production
- Food processing
- Automobile industry
- Electronics and telecommunications.
The large avenues of industries steer the way for CRE opportunities in the form of industrial warehouses, small scale factories, and industry godowns. The investors seek opportunities in the industrial sector due to its potential for long-term returns and resistance from economic fluctuations. The same is the case in Bangalore, where there has been a rise in the industrial sector where the sector now contributes an estimated 87% of the state’s total GDP.
Although the rising e-commerce has led to downgrading the retail sector, some portion of it still manages to contribute to the Bangalore CRE market. Some leading retail chains in Bangalore include- Urban Ladder, Lifestyle stores, Tanishq, and Printo. These contribute to the CRE economy of the city. Another facet of the retail sector can be seen in the avenues such as malls and shopping complexes which have shown growth from the commercial real estate aspect with investors pouring in to buy and lease the properties for shopping arenas.
As the top IT companies have made their headquarters in Bangalore, several NRI clients visit the city routinely for business meetings or conferences. This has pushed the hospitality sector to develop 5-star hotels and housing properties for foreign clients. With the leading hotel chains such as Radisson, The Oberoi, ITC Windsor opening hotels in the city, the hospitality sector is sure to thrive well in the future.
Working-class individuals form a major proportion of Bangalore’s population. This works to increase the demand for more residential complexes such as apartments, housing, residential societies, duplexes, condos, and flats. The multifamily real estate areas like Electronic city, Whitefield, North Bangalore, Hennur, Basavangudi, Benson town, Indira Nagar, etc. Have produced some of the most luxurious residential areas which have good investment potential.
Status Of CRE Investments In Bangalore
Bangalore provides CRE investment opportunities in all sectors of commercial real estate. The most famous avenue of investment in Bangalore is the office space sector due to the benefits of a longer lease period, greater demand for working buildings, and better owner-client relationship.
The second avenue taking the lead after the office sector is the industrial sector where there is a growth of investors owing to higher industry growth, development of micro-markets, and better job opportunities.
Bangalore has proven to be a hotspot for CRE investing with investors from outside India seeking opportunities to invest in the CRE market due to its high potential of generating capital at a faster pace.
Bangalore CRE FAQs:
CRE or commercial real estate is a property which used for purposes other than residential like offices, banks, retails outlets, shops, etc.
This is also compared to other properties in the area which have been bought or sold to estimate he valuation of that specific property. This advantageous in ascertaining the true value of the CRE or residential property if there is a need to buy or sell it.
The benefits of CRE investing include-
- A source of steady cash flow with good returns rate.
- More secure than other property investments
- Long-term leases provide a longer period of returns
- Tax benefits
Bangalore has shown exponential growth in terms of the development of office spaces, industries, retail outlets, and residential spaces which have contributed significantly to the CRE capital of India.
Bangalore offers various opportunities for CRE investments. The most popular areas for investment are Bellary Road, Sarjapur Road, Whitefield, and North Bangalore.
If you are thinking about indulging in CRE investing you should consider things such as:
- Location of the property, the reputation of neighbourhood and area
- The current status of the CRE market in the area
- The finance budget of investor
- The lease terms and agreements
A CRE broker is involved in sell and purchase of the commercial real estate property and overlooks the transactions between the property owner and the buyer.
Hiring a CRE broker will help lower the burden of negotiations and documentation from the owner and make the process easier. However, if the property has lower leasing terms, the commission given to a CRE broker may downgrade the profitability.