Indian real estate offers 294 million sq ft office assets REIT potential

Indian commercial real estate market is likely to provide 294 million sq ft of space that can be listed under Real Estate Investment Trusts (REITs) valued at $35 billion from the existing office stock, said a JLL India report.

Rising transparency levels, progressive regulations, and a robust commercial real estate market in the country have made the segment a favourite among institutional investors, who have allocated nearly $17 billion 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 joint venture last month. With a portfolio of 32.6 million sq ft, the listing is also Asia’s largest in area terms of area.

“The listing of India’s first REIT heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in the real estate market. The 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,” said Ramesh Nair, CEO & Country Head, JLL India.

With 33% share of REITable space, Bengaluru will provide the highest REITable assets totalling 97.8 million sq ft, worth $10.7 billion. Mumbai follows Bengaluru with a 17% share of total REITable space at 49.7 million sq ft worth $8.6 billion. Delhi-NCR and Chennai follow Mumbai both in space and value terms, the report said.

“Indian office space holds the potential to offer additional 101 million sq ft of office space for REIT from the new office completion expected during 2019-21. This could help upcoming REITs to gain from the upside in rentals as well as capital appreciation,” said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

According to Das, 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.

With large and quality IT spaces occupied by prominent global players, Bengaluru will be the most favoured city for REITable assets. Presence of single-ownership ready properties makes 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 centres along with the BFSI space is expected to keep office space demand robust over the next 3 years.

Source:The Times of India

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