Big comeback of commercial real estate in India!

These days, the demand for commercial spaces has been on the rise and is driving returns higher than any other prominent company in cities around the world. Prominent cities in India such as Bengaluru, Mumbai, and Delhi have led the commercial property market in terms of annual rental performance. Reports have confirmed that these three markets have outperformed all other global hotspots with an annual return of 9.5-10.5%.

According to a recent global survey by a popular real estate consultancy, Bengaluru has topped the list with an annual rental yield of around 10.5%, while cities such as London, Singapore, New York and Hong Kong ranged from 2.5 and 7% at the highest. This is just one example that shows that Indian commercial real estate is back on track.

Bangalore and Mumbai in the list of the 5 most important cities in the world

Yes, Mumbai and Bengaluru are on the list of the top 5 cities in the world for future rental growth and it is also expected to grow at 22% and 16% respectively. Also, 67% of investments are flowing to the Indian real estate market, which is the highest among all other countries. This clearly indicates the growing appetite of the Indian commercial real estate market.

Healthy traction since 2014

With all the real estate developments in India, it is quite evident that the office space market has had a good traction since 2014. India recorded office space transactions of approximately 18 million square meters. foot in the first six months of 2015, and by the end of 2015, the country completed the transaction of a whopping 40.21 million square meters. foot which is the highest since 2011. It should also be noted that, 40.21 million m2. foot area, transactions of about 12 million square meters. foot happened in Bangalore.

High demand for office spaces

True, yields have shown robust growth, but current office rents in Delhi and Mumbai remain below their 2007 highs at 19% and 17% respectively. Bengaluru is an outlier here too in that rents are up 8%. Mumbai and Delhi are currently facing an acute shortage of quality space, which has created upward pressure on office rentals.

This being the scenario for commercial real estate in India, Real Estate Investment Trusts are expected to give new impetus to commercial real estate and investments are also estimated to be worth $ 100 billion in the next few years. Despite a 17% vacancy rate, investors and occupants continue to struggle to find quality office space in major districts.

Due to strong demand for office space from startups and large organizations, rents are seeing a substantial increase leading to demand outstripping supply. By looking at the demand for office space, we can say that the commercial real estate market is making a comeback after being in landfills for about three years, having great deals in the pipeline, and showing signs of recovery.