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    Exploring The Commercial Real Estate Asset Classes In India

    • 5 min read
    • Last Modified Date: January 2, 2024
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    • The Indian real estate market is dynamic and changing. And it’s always provided something for everyone: Whether you’re a seasoned investor looking to diversify your portfolio with a long term commercial property investment, or whether you want traditional rental income from a residential property, its like an all you can eat buffet. 
    • Historically, the real estate investment class has been The asset class which has created the most wealth for investors.
    • However, a large part of real estate investment, commercial real estate investment in particular has been restricted to institutional investors and individuals or companies with a high net worth. 
    • In this article, we’ll delve into the different commercial real estate asset classes in India, and how alternative investment is making these asset classes more accessible and affordable for regular investors by lowering the investment threshold required to get into commercial real estate. 

    Retail Real Estate: A Shopper’s Haven 

    • Retail real estate is made up of properties such as luxury shopping malls, high value street retail outlets, and even stand alone stores. Think of a big shopping mall in your favourite metro city. Yes, you know the ones. 
    • The retail sector in India is silently booming; driven by increasing consumer spending and a thriving middle class who are flocking to metro and tier-1 cities for career opportunities. 

    Investment Opportunities: When it comes to retail real estate, investors have the potential to capitalize from the rising consumer culture in India. Retail spaces in prime locations churn out lucrative rental income and undergo capital appreciation. 

    With the entry of many new international and domestic brands in the market, there is competition for premium spaces, and investors can utilise alternative investment models such as fractional or joint ownership to enter this market with a lower entry ticket. 

    Things To Consider: 

    While retail real estate is an appealing investment opportunity, criteria like as location, footfall, and tenant quality are crucial in determining investment success. Investors should also keep up with the newest retail trends, such as the growing desire for omni-channel retailing and the influence of e-commerce on physical stores.

    Office Space: Powering The Corporate World 

    Commercial real estate, whether brick and mortar offices or co-working spaces, are the backbone of India’s corporate world, creating spaces for Indian businesses and startups to operate and grow. 

    Based on a Knight Frank report on how Indian real estate performed in Q3 of 2023, the office market saw a healthy 17% year on year (YoY) growth. More importantly, this is the sixth consecutive quarter where YoY rent growth has been stable or positive for India’s commercial office market. 

    Investment Potential: Investors interested in office properties can profit from consistent rental income and long-term leases typical of business tenants. With the rise of startups and the trend of remote work, flexible office spaces are gaining traction, offering investors with opportunities that go beyond traditional office buildings. The idea is to identify growing business clusters and strategically invest in them.

    Things To Consider: Location is still an important issue in commercial real estate investment. The proximity of business centres, transport hubs and amenities is critical for attracting renters. Furthermore, recognising the changing needs of the workforce, such as the demand for environmentally friendly and technologically advanced office spaces, is critical for making sound investment decisions.

    Industrial Real Estate: The Backbone of Logistics 

    • The industrial real estate market in India can be said to be the skeleton of the country. It encompasses all the things an individual would normally turn a blind eye to.
    • Think about the vast number of warehouses, logistic parks, manufacturing facilities, and multitude of service centres in the country. You guessed it: all of it is commercial real estate. 
    • E-commerce companies and businesses are rapidly growing in the country, and that has led to an increased demand for supply chain efficiency and more available industrial spaces. Industrial real estate is absolutely vital for the country’s economic development considering it facilitates the seamless movement of goods across state borders.

    Investment Potential: 

    • Based on CBRE’s India Market Monitor Q3 2023, the Industrial and Logistics sector is forecasted to show a 5 year high absorption projection by the end of 2023. 
    • When we talk about supply additions and leasing of industrial real estate, these metrics have also shown considerable growth, highlighting important aspects and growth trends in the Indian real estate market. 
    • Because of the increased demand for storage and distribution facilities, investing in industrial real estate can provide investors with significant returns. E-commerce behemoths and logistics firms are aggressively seeking strategically positioned facilities to optimize their operations.
    •  Furthermore, government efforts such as ‘Make in India’ help to expand industrial facilities, opening up new prospects for investors.

    Things to Consider: In industrial real estate, location and connectivity are critical. For successful logistics operations, proximity to key transit routes, ports, and urban areas is critical. Investors should also assess the space’s adaptability to various industrial uses and the possibility for technological integration to improve operational efficiency.

    Assetmonk: Your Gateway to Commercial Real Estate Trends 

    The integration of technology and web based alternative investment platforms has democratised investment in commercial real estate, making it more accessible for a variety of investors by offering flexible models and alternative solutions to problems that have existed traditionally within the real estate sector. 

    Assetmonk, is a pioneer in alternative real estate investment, and we understand the immense potential in the Indian commercial real estate industry. We specialize in locating high-yielding opportunities in retail, office, and industrial asset classes, allowing our investors to diversify their portfolios while maximizing profits. 

    We offer a number of alternative investment models, such as fractional ownership or joint ownership of high end commercial properties, sub leasing ventures, and more. Trophy locations with potential for high Internal Rates of Return (IRR) are prioritised, and due diligence is done to ensure these deliver lucrative returns to our investors. 

    Bottom Line: A Commercial Real Estate Review

    The commercial real estate landscape in India provides a plethora of investment opportunities through the retail, office, and industrial asset classes. Investors looking to diversify their portfolios and capitalize on the evolving trends in the real estate sector should consider the potential of commercial properties. 

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    FAQs

    Q: What are the main types of commercial real estate assets in India?

    A: The three major commercial real estate asset classes in India are retail, office, and industrial properties, each with its own set of investment opportunities.

    Q: How has alternative investment impacted commercial real estate asset classes?

    A: Alternative investment models, such as fractional ownership and joint ownership, have lowered the investment threshold, making commercial real estate more accessible to regular investors. Assetmonk and other platforms provide flexible solutions for a wide range of investors.

    Q: What factors should be taken into account when investing in office space?

    A: Location is still an important consideration, with proximity to business centres, transportation hubs, and amenities being critical. It is also critical to recognise changing workforce needs, such as environmentally friendly and technologically advanced office spaces.

    Q: What factors should retail real estate investors consider?

    A: Location, footfall, and tenant quality are all important factors to consider when investing in retail real estate. It is also critical to stay current on retail trends such as omni-channel retailing and the impact of e-commerce.

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