Indian cities have done better when it comes to office real estate than its counterparts across Asia Pacific region.
By Varun Singh
Indian real estate sector may not be doing good overall. However, the Indian office real estate sector has performed pretty well in the last few days.
According to reports, of the top 8 Indian cities, 6 feature in the top 10 cities of Asia Pacific region, in terms of annual leasing transaction volumes.
A report by Knight Frank reveals that, India Office sector receives over USD 2,900 mn private equity.
Bengaluru with 15.3 mn sq ft and Hyderabad with 12.8 mn sq ft were the second and third largest office markets in the Asia Pacific region in terms of office leasing transactions.
This was followed by Mumbai with 9.7 mn sq ft and National Capital Region with 8.6 mn sq ft and feature ahead of cities such as Beijing, Shanghai, Singapore, Jakarta, Kuala Lumpur and several others.
TOP 10 CITIES IN ASIA PACIFIC (APAC) REGION BASED ON ANNUAL TRANSACTION VOLUMES (2019)
| Rank | City | Country | Office leasing transactions in 2019 (mn sq ft) | Office stock(mn sq ft) | Vacancy |
| 1 | Tokyo | Japan | 81.0 | 287 | 0.6% |
| 2 | Bengaluru | India | 15.3 | 165 | 4.8% |
| 3 | Hyderabad | India | 12.8 | 75 | 7.0% |
| 4 | Mumbai | India | 9.7 | 146 | 17.5% |
| 5 | National Capital Region | India | 8.6 | 166 | 17.1% |
| 6 | Beijing | China | 6.8 | 113 | 10.1% |
| 7 | Pune | India | 6.2 | 73 | 4.2% |
| 8 | Chennai | India | 5.2 | 73 | 8.8% |
| 9 | Guangzhou | China | 3.0 | 63 | 8.4% |
| 10 | Kuala Lumpur | Malaysia | 2.0 | 93 | 22.0% |
According to Knight Frank Research, 2019 was a milestone year for the Indian office market. The All-India office transaction activity reached a historic high of 60.6 mn sq ft (5.6 mn sq m) in 2019, predominantly driven by demand from these three segments – IT, BFSI and co-working.
Some of the Indian cities have stepped on the pedestal and stolen the limelight from the other cities in the Asia-Pacific region.
Four out of the top six cities in India except for Mumbai and NCR have single-digit vacancy levels.
The problem of supply crunch is acute in markets of Pune and Bengaluru which had a city level vacancy of 4.2% and 4.8% respectively at the end of 2019.
For Mumbai and NCR, the vacancy levels maybe higher at a city level, however, for the sought-after business districts of these cities like Bandra Kurla Complex and Lower Parel in Mumbai and Golf Course Extension Road and DLF Cybercity in Gurugram, the vacancy levels are in single digits.
The robust demand from occupiers, low vacancy rate, compression in cap rate and rent growth highlights the strong fundamentals of the Indian office market.
EQUITY INVESTMENTS IN OFFICE ASSETS IN INDIA
| Year | Amount invested (USD mn) |
| 2011 | 296 |
| 2012 | 393 |
| 2013 | 843 |
| 2014 | 693 |
| 2015 | 314 |
| 2016 | 1,226 |
| 2017 | 2,168 |
| 2018 | 4,092 |
| 2019 | 2,946 |
| Grand Total | 12,972 |
Shishir Baijal, Chairman & Managing Director, Knight Frank India said, “The availability of vast talent in India in the fields of Science, Technology, Engineering and Mathematics (STEM) and the cost arbitrage makes India one of the most attractive office destinations for companies in the BFSI and IT sectors. A balanced demand supply equilibrium has led to double-digit rent growth in most of leading Indian markets, making the investment premise very promising and the PE investments of USD 13 billion are a testament to it.”
Since 2011, the Indian real estate sector has received an equity investment of USD 22.7 billion across the office, retail and warehousing assets in the previous decade. Of the total, The Indian office assets garnered 57% share or USD 13 billion worth of these equity investments.
Also Read: Office transactions hit historic high of 60.6 msf in 2019
