Bottom Line: Potential value of REITable office space assets at USD 35 bn. IT/IT-SEZ office space to dominate REITable assets across the country. Bengaluru to lead REITable office space share, followed by Mumbai, Delhi-NCR and Chennai.
Indian commercial real estate market is estimated to provide 294 mn sq ft of REITable space from the existing office stock. According to JLL’s latest report titled “India REITs – Heralding a new era in real estate investments” these REITable assets would be valued at USD 35 bn.
Rising transparency levels, progressive regulations, and a robust commercial real estate market in the country have made the segment a favorite among institutional investors, it says. Investors have allocated nearly USD 17 bn in the form of direct investments as well as through entity level investments from 2006 to 2019 in the office space.
India has already seen its first REIT listing from Embassy Group-Blackstone JV in March this year. With a portfolio of 32.6 mn sq ft, the listing is also Asia’s largest in area terms of area.
Ramesh Nair, CEO & Country Head, JLL India says, “The listing of India’s first REIT heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in real estate market. Growing knowledge of REITs will ensure acceptability and gradual increase of interest from retail investors. We expect to see other asset classes like retail, warehousing and hospitality also offering REITable assets in the times to come.”
The report states with 33% share of REITable space, Bengaluru will provide the highest REITable assets totaling 97.8 mn sq ft, worth USD 10.7 bn. Mumbai follows Bengaluru with 17% share of total REITable space at 49.7 mn sq ft worth USD 8.6 bn. Delhi-NCR and Chennai follow Mumbai both in space and value terms.
With large and quality IT spaces occupied by prominent global players, Bengaluru will be the most favored city for REITable assets. Presence of single-ownership ready properties make it easier to aggregate the assets and manage them for REITs.
Emergence of new office space occupiers, continued demand from IT/ITES, global in-house centers along with the BFSI space is expected to keep office space demand robust over the next three years.
Samantak Das, Chief Economist and Head of Research & REIS, JLL India says, “Indian office space holds the potential to offer additional 101 mn sq ft of office space for REIT from the new office completion expected during 2019-21. This could help upcoming REITs to gain from upside in rentals as well as capital appreciation. While the strong institutional flow of funds into real estate will continue to provide initial momentum towards REITs’ growth in the country, active participation of insurance and pension funds in future will help in long term growth of the market.”
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