Mumbai, Delhi, Bengaluru Top Global Commercial Realty Mkt
Mumbai:
Our Bureau
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ON THE RISE While Bengaluru tops the list with 10.5% annual yield, New York, Singapore, London, Tokyo and Hong Kong range between 2.9% and 7%: A global survey of property consultant Knight Frank
Indian cities such as Mumbai, Delhi and Bengaluru have topped the global commercial property market in terms of annual rental yields as demand for commercial spaces has picked up in recent times.These three markets have outperformed all other global business hot spots with 9.5% to 10.5% annual returns led by growing depth of lease market and demand for commercial properties.
While Bengaluru topped the list with 10.5% annual yield, cities like New York, Singapore, London, Tokyo and Hong Kong ranged between 2.9% and 7% at best, showed a global survey of property consultant Knight Frank.
Mumbai and Bengaluru have also featured among the list of top 5 global cities for future rental growth and are expected to grow to nearly 22% and 16%, respectively.
The rising appetite for Indian commercial properties is attributed to about 67% of investments flowing into Indian real estate from overseas -highest among all other countries.
“Indian office market has been maintaining a healthy traction of 2014 and has clocked office space transactions of 18 million sq ft in the first six months of 2015, and we expect the year to complete at about 40 million sq ft which is the highest since 2011. This is a record year for Bengaluru which is expected to transact office space to the tune of around 12 million sq ft in 2015,“ said Shishir Baijal, chairman & managing director, Knight Frank India. While yields have registered a robust growth, current office rentals in Mumbai and Delhi are still lower than the 2007 peak levels by 17% and 19%, respectively.
“Rentals across Mumbai and Delhi are still below the 2007 peak levels, though Bengaluru is an outlier wherein rentals are 8% more. Currently, these cities are facing an acute shortage of good quality office space in the face of robust demand which is creating an upward pressure on office rentals that is expected to scale up in the range of 6-7% in the next six months year-onyear,“ said Samantak Das, Chief Economist & National Director of Research, Knight Frank India.
The Indian Real Estate Investment Trusts are expected to give a further push to commercial real estate and is estimated to attract investments worth $100 billion in the next few years.
According to Baijal, even though the aggregate vacancy level is at 17%, occupiers and investors are still facing the challenge of getting quality office spaces across prime business districts, wherein vacancy is in single digits.
Due to a robust demand from start-ups and ecommerce, other than IT ITeS, BFSI and manufacturing, office rentals are experiencing a substantial surge. Going forward also, he expects the demand to continue outstripping supply.
The commercial real estate market is making a comeback after being in the dumps for over three years, with recent deals and a healthy pipeline indicating early signs of recovery, especially with large transactions picking up.
While big institutional investors such as Blackstone and GIC have been investing in commercial properties for some time, even big corporate occupiers are returning to the market, hinting at improved business demand and the need for expansion.
Bengaluru and Mumbai have been leading with these large transactions.Recently, Tata Consultancy Services (TCS) entered into an agreement to lease over two million sq ft of built-tosuit space at Hiranandani Estate in Thane for 15 years, what's being billed as the largest single office space transaction in India in terms of area. Another large office space deal was concluded in May when Flipkart leased a 2-million sq ft custom-built office campus in Bengaluru.
While Bengaluru topped the list with 10.5% annual yield, cities like New York, Singapore, London, Tokyo and Hong Kong ranged between 2.9% and 7% at best, showed a global survey of property consultant Knight Frank.
Mumbai and Bengaluru have also featured among the list of top 5 global cities for future rental growth and are expected to grow to nearly 22% and 16%, respectively.
The rising appetite for Indian commercial properties is attributed to about 67% of investments flowing into Indian real estate from overseas -highest among all other countries.
“Indian office market has been maintaining a healthy traction of 2014 and has clocked office space transactions of 18 million sq ft in the first six months of 2015, and we expect the year to complete at about 40 million sq ft which is the highest since 2011. This is a record year for Bengaluru which is expected to transact office space to the tune of around 12 million sq ft in 2015,“ said Shishir Baijal, chairman & managing director, Knight Frank India. While yields have registered a robust growth, current office rentals in Mumbai and Delhi are still lower than the 2007 peak levels by 17% and 19%, respectively.
“Rentals across Mumbai and Delhi are still below the 2007 peak levels, though Bengaluru is an outlier wherein rentals are 8% more. Currently, these cities are facing an acute shortage of good quality office space in the face of robust demand which is creating an upward pressure on office rentals that is expected to scale up in the range of 6-7% in the next six months year-onyear,“ said Samantak Das, Chief Economist & National Director of Research, Knight Frank India.
The Indian Real Estate Investment Trusts are expected to give a further push to commercial real estate and is estimated to attract investments worth $100 billion in the next few years.
According to Baijal, even though the aggregate vacancy level is at 17%, occupiers and investors are still facing the challenge of getting quality office spaces across prime business districts, wherein vacancy is in single digits.
Due to a robust demand from start-ups and ecommerce, other than IT ITeS, BFSI and manufacturing, office rentals are experiencing a substantial surge. Going forward also, he expects the demand to continue outstripping supply.
The commercial real estate market is making a comeback after being in the dumps for over three years, with recent deals and a healthy pipeline indicating early signs of recovery, especially with large transactions picking up.
While big institutional investors such as Blackstone and GIC have been investing in commercial properties for some time, even big corporate occupiers are returning to the market, hinting at improved business demand and the need for expansion.
Bengaluru and Mumbai have been leading with these large transactions.Recently, Tata Consultancy Services (TCS) entered into an agreement to lease over two million sq ft of built-tosuit space at Hiranandani Estate in Thane for 15 years, what's being billed as the largest single office space transaction in India in terms of area. Another large office space deal was concluded in May when Flipkart leased a 2-million sq ft custom-built office campus in Bengaluru.
Source: Economic Times, 16-10-2015
