By Mr. Ramesh Nair MD , West, JLL India
The number of HNIs (high net worth investors) & and corporates seriously looking to invest into Indian office space has increased manifold in the past few years.
 |
| Mr. Ramesh Nair MD JLL India |
Mumbai continues as India’s numero uno office space investment destination, with companies from all over the world unerringly zeroing in on the financial capital.
True Financial Hub..!
As South Asia’s only true financial hub, Mumbai is among India’s best places to invest in commercial real estate.
In times of global economic uncertainty (2008-09), investors flock to markets that have consistently proved their long-term stability and fundamentals.
In a scenario wherein institutional investors are showing reduced preference for commercial real estate in their portfolios, Mumbai continues to present HNI and corporate investors with myriad growth opportunities in office properties.
Low Risk and High Returns..!
However, the multitude of options also gives many enthusiastic investors heartburn - where on Mumbai's vast and complex map are the low risk / high returns locations?
Today, Mumbai as a city for commercial space investment reveals a high rate of vacancies in many locations. The rental yields in these micro-locations are expected to decrease marginally over the next one year. While this seems to present a depressing scenario on the surface, the fact is that we are now looking at the bottom of the curve.
In other words, these markets are expected to bottom out over the next 12 months and will consequently start to move up again. These locations have significant long term capital value appreciation potential, and well-informed investors are keeping a close eye on them.
Mumbai Commercial property Classified:
Central Business District :
The CBD (Central Business District) which includes the micromarkets of Nariman Point, Fort, Ballard Estate, Cuffe Parade and Churchgate
Secondary Business District:
The SBD (Secondary Business District) which includes the micro-markets of Worli, Lower Parel, Prabhadevi, the Bandra Kurla Complex (BKC) and Kalina,
Peripheral Business Districts:
The PBDs (Peripheral Business Districts) of Andheri – Jogeshwari, Malad – Goregaon, Powai – LBS Marg & Thane - Navi Mumbai. The commercial property investment opportunities vary according to the unique characteristics of each micro-market.
At first glance, some of these markets would seem to be places to avoid, given the high vacancies there. However, some of these areas bear closer scrutiny beyond the seemingly obvious.
Data trends of the past shows that rentals and capital values in almost all Mumbai micro-markets, except Lower Parel and Andheri, have either remained stable or gone up over the past 30 months.
Many corporates are today migrating from the traditional CBD to BKC and Lower Parel. Over the next two years, the rentals and capital values in Mumbai’s CBD are expected to come down, rendering them more buyer & tenant-oriented for the first time in decades.
Meanwhile, the SBD district of Lower Parel is seeing significant demand, given the fact that the rentals and capital values there are less than half of those in the CBD and at the Bandra Kurla Complex. Over the next one year, the rental and capital values in Lower Parel are expected to bottom out. Commercial properties here are an excellent investment proposition at the current pricing levels.
Meanwhile, BKC is emerging as Mumbai’s acknowledged ‘alternate CBD’, with many banks moving their headquarters there from their erstwhile CBD locations. Capital values & rental values in BKC are expected to go up in the medium term, making commercial properties there a good buy.
The limited commercial space supply that BKC will have to address the strong demand over the next two years adds to its investment potential. The Bandra Kurla Complex is particularly interesting for HNIs from the diamond industry, given its proximity to the diamond bourse.
Office Space Investment Guidelines:
Entrepreneurs who are considering buying commercial real estate for self use should ensure that the amenities in the project match their business needs
Investors need to make sure that they study the quality of building, location, demand supply dynamics & yield compression possibility
The best buildings in each micro-market will always command a premium
Check the developer credentials, potential for infrastructure development, access to public transport & quality of property management
Investors looking at income producing office assets should look at the break-up of cash flows, the vacancy factor, expenses such as maintenance, property tax and building insurance, lease term, lock-in period and expiry dates, long-term capital appreciation potential and refurbishment, refinancing and re-positioning potential.
About the author Mr. Ramesh Nair is MD (West, Jones) in Lang LaSalle India
No comments:
Post a Comment