Commercial property segment to grow faster
High demand is expected to push absorption of commercial real estate across the country by over 10% to 33.5 million sq ft in 2018, Economic Times reported. Supply of new grade-A commercial spaces, which proved a hindrance for absorption last…

High demand is expected to push absorption of commercial real estate across the country by over 10% to 33.5 million sq ft in 2018, Economic Times reported.

Supply of new grade-A commercial spaces, which proved a hindrance for absorption last year, is estimated to rise above 41 million sq ft. Lease rentals for commercial offices are expected to witness an annual growth of around 1.5%, closely tracking the 2017 trend, it quoted a JLL India study.

Demand for office and commercial spaces is expected to be driven by occupiers from IT/ITeS, banking, financial services and insurance (BFSI) sectors, apart from co-working space operators and data centres focusing on digitization.

“Many Indian corporate occupiers who had earlier delayed their decision post-GST and demonetization are now ready to take a decision on their real estate requirement,” it said

Last year saw co-working emerge as a strong sector with operators in this segment leasing up to 1.5 million sq ft office space, making up 5% of the overall absorption.

The demand was driven not only by start-ups and independent professionals, but also large corporates that preferred outsourcing capacity by involving the third party coworking model to reduce capital expenditure and increase collaborative culture.

Says Rubi Arya, executive vice-chairman of Milestone Capital Advisors: “Co-working spaces and strata floor investments will be the segments to watch out for in the coming year. Big- ticket size transactions shall continue to happen for fund houses.”

With a little property value addition that can improve the yields and returns, earlier investments will also start looking out for the exits. This would offer good opportunities for potential investments,” he said

With the occupancy level of few branded co-working operators already touching 100%, the segment is expected to grow by up to 40-50% and receive about $400 million in investments by 2018.

During 2017, rentals had risen, recording a 2.4% on-year increase with average pan-India rents. Vacancy levels in the pan-India grade A office stock remained low at 14.3%, with Bengaluru standing out as the office market with the lowest vacancy in the country in the year. In 2018, pan-India vacancy is projected to be around 14.7%.

 

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