Office space demand sees sustained pickup across top cities

The demand for commercial real estate across the country is getting stronger and is witnessing a sustained momentum. The office space absorption across top 9 property markets has seen a sustained growth with total 28.3 million sq ft picked up during the first nine months of 2016, showed a Colliers International report.

Last year, commercial real estate in India registered a record absorption, and given the current momentum, this year is also headed in the same direction.

“The key office markets across India, especially in the south, continue to go from strength to strength in terms of office absorption, and with rents increasing significantly compared to prior years in certain micro markets. This is good news for owners and developers, but a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply,” said George McKay, South Asia Director, Office & Integrated Services at Colliers International.

Colliers expects the leasing activity to pick up in the upcoming quarters and vacancies to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad.

“Demand for commercial real estate has been increasing over the recent quarters as corporate entities consolidate and expand operations following a positive economic scenario. Demand for commercial real estate has been on the upswing across markets and we are experiencing it in our ongoing township projects in Panvel, Chennai and commercial tower in GIFT city near Ahmedabad,” said Niranjan Hiranandani, CMD, Hiranandani Communities.

“As I see it, business growth in India has been all about adopting global best practices, and I expect demand for commercial realty to keep growing through 2016 and 2017,” he said.

Expansion strategies by occupiers in ecommerce, healthcare and technology space are expected to increase in the overall occupancy levels. The growing office demand is expected to outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad. This should, therefore, lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets, the report said. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario.

According to McKay of Colliers International, the demand for commercial spaces has resulted in land markets in the main cities becoming active as established and next generation developers are looking to replenish their land reserves to satisfy both existing and new client demand. During the first nine months of the year, occupier demand has focused on quality products in preferred micro markets in most of the cities, whereas startup and small-size companies showed an inclination towards serviced and co-working space.

Also, there has been an increased demand for leased out commercial assets in the market as indicated by a recent deal by Brookfield Asset Management to buy 4.5 million sq ft grade-A office and retail portfolio of Hiranandani Group in Mumbai's Powai suburb for $1billion.

“We expect an increase in office demand beckoned by improving Business Confidence Index which showed a 5.7% increase during April-July 2016. Other factors such as controlled inflation, falling interest rates indicate strong economic fundamentals,” Colliers said.

Source: PropertyatNeoDevelopers.Wordpress.Com

Commercial property investment is much more profitable, safe and stable

Businessmen feel that contrary to the popular belief, real estate is not always a risky gamble provided the investor is well informed about market conditions, his requirements and his finances.

Considering all of this, a commercial property is the most stable asset and attraction in real estate market today.

It is felt that investing in commercial properties is more profitable than residential properties.

There are multiple reasons to believe so:

The ready to use commercial properties are wisely priced as compared to residential properties. It can only go up as construction and land cost is increasing for new projects, thus pushing prices upwards for ready to move properties.

Commercial investment fetches higher rental value as compared to residential investment.

Commercial Developers are offering very lucrative plans such as Assured Return on investment till possession, Lease Guarantee for the property post possession, Buy back options, Possession Linked Plans.

"Cities like Mumbai, Bangalore, Hyderabad, Delhi, Noida and Gurgaon are the hubs for commercial properties. With major corporate offices and multinational companies opening their branches in these locations, investment in commercial real estate will be highly beneficial both in short and long run," said Jetesh Prasher, CEO of GenX Deals.

GenX Deals is a renowned web portal focusing of information related to various commercial projects and one stop for all destinations for real estate related information.

We are all aware of the fact that real estate market is going through a consolidation phase, thus investment in commercial real estate will prove immensely beneficial for both who are looking to have regular monthly income from leasing their commercial properties or those who want to use the space for their own business and saving on monthly rent thereby.

"With the new government, more thrust has been made on reviving business sentiment. Proposals like increasing foreign direct investment limits, real estate investment trust and smart cities projects will bring increase flow of money and demand for commercial properties. We are getting very high volumes of business from developers engaged primarily in development of commercial projects," Akash Kohli, Marketing Director of GenX Deals, added.

The return on investment is calculated in two ways in a commercial property, one being the rent which is approximately 8-9 percent per annum of the cost of the property plus capital appreciation which is approximately 10 percent annually thus giving a stable return of 18-19 percent per annum.

For example a shop in a commercial complex costing about one crore shall give a rent of Rs 75,000 per month plus its cost shall increase to about 1,25-1.30 crore within a time fame of three years. Whereas yearly rental yield on residential properties hover close to mere three percent.

Explaining the Delhi NCR commercial real estate market, Jetesh Prasher also said that Delhi NCR has highest concentration of under-construction real estate projects in the country, roughly about 33 percent of the total value.

"Gurgaon has already proved to be a hot favourite for commercial property investors. New projects are also budding in Gurgaon, Noida, some pockets of South Delhi which will be prime locations for corporate offices. Thus, investors in commercial properties are likely to get greater profit margins in days to come," he added.

Source: PropertyatNeoDevelopers.Wordpress.Com

Solar cells on your terrace

Will Haryana’s new policy meet its objective or is it too ambitious?

The Haryana government has made it mandatory for all buildings on plot size of 500 square yards or more to install rooftop solar power systems by September 2015. The order will be applicable to private bungalows, group housing societies, builder apartments, malls, offices, commercial complexes, schools, hospitals — any building, new or old, that meets the plot size criteria.

The government will offer a 30% subsidy on installation costs on “a first-come-first-served” basis.

Gurgaon residents and environment experts are doubtful if the initiative will help realize the objective. The Haryana government in the past has made similar provisions mandatory such as water harvesting, solar water heating, CFL etc but not much was achieved.

Chetan Agarwal, an environment analyst is of the view that while the policy is good, it is an ambitious one. "A lot of work needs to be done to develop an enabling environment for promoting solar energy in an effective manner.”

Section 2.3 of the policy clearly states that “This policy endeavors to create an enabling environment to attract public and private investments in solar power generation and also in creating manufacturing facilities for system/devices/ components used in solar power generation in the state."

A lot of work needs to be done to attract investment and create a supply of high quality equipment for installation. In addition, an entire ecosystem of vendors who can supply the equipment and also manage the generation, do the maintenance etc, needs to be spruced up, Agarwal says.

Section 6-7 of the policy talks about roof top grid interactive systems and mentions three categories that include cluster of rooftops of public buildings, cluster of private buildings in cities and rooftops of individual buildings.

The cluster approach is likely to be a better option as it will provide economies of scale for investment, for installation, and most importantly for maintenance. And individual property owners will get a roof rent, rather than the financial and maintenance burden, Agarwal says, adding that the focus ought to be on the cluster approach than on the individual building approach.

Source: -PropertyatNeoDevelopers.Wordpress.Com