INDIA’S REAL ESTATE STOCK TO GROW BY
200 MN SFT IN 2019 TO REACH 3.7 TRILLION SFT: CBRE
· Policy reforms across sectors in 2018
led to a tremendous improvement in India’s ‘Ease
of Doing Business’ ranking; India remains the fastest growing major economy
in the world
· 2018 saw 47 million sq. ft. of office
space uptake, dominated by Bangalore,
Delhi-NCR and Hyderabad. Trend to continue in 2019 with evolving landlord occupier relationships to be the enablers of change
· Retail
activity maintained a healthy demand-mix across various brand categories;
strengthened by the completion of nearly 5.1
million sq. ft. of investment grade supply in 2018. Despite tightening of
FDI norms in e-commerce, omni channel will continue
to reinvent retail formats in 2019
· The
logistics sector picked up on the back of GST implementation and granting of ‘infrastructure status’; absorption
levels touched nearly 24 million sq. ft.
in 2018
·
With
the industry absorbing the impact ofRERA
and GST implementation; residential
demand and supply inched upwards in 2018; alternate asset classes such as co-living, student and senior housing to emerge stronger in
2019
· Nearly
USD4.7 billion of investments were
witnessed in 2018, primarily across office, land / development sites and the retail
sector. Investor appetite for land remained strong with land accounting for 34% of all investment activity in
2018. Real Estate Investment Trusts
(REITs) became a reality; thereby providing investment opportunities to retail
/ institutional investors
Bangalore, March 27,
2019:
CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm, today
announced the findings of its Real
Estate Market Outlook 2019 - India. As per the report, India continues to
retain its position as the world’s fastest growing major economy, on the back
of improved investor confidence and better policy reforms. The IMF’s database
also suggested that India’s contribution to world growth has increased from 7.6% during 2000-2008 to 14.5% in 2018. The CBRE report highlights
2019 trends and dynamics across various segments in the real estate sector in
India.
Anshuman Magazine,
Chairman & CEO - India, South East Asia, Middle East & Africa said, “The current
government’s pro-reform policies have yielded positive news for the equity
market and investment inflows, there by positioning India as an attractive
business destination. The growth of the Indian Real Estate market in 2019 will
be driven by numerous factors including technology, demand-supply dynamics,
improved ease of doing business rankings and the dust settling post the
implementation of reforms such as GST, RERA among others. We expect to see
significant growth across segments, which will lead to the addition of almost 200 million sq. ft. of new real estate
space in 2019 across categories including office, retail, residential and logistics”.\
Technologies
such as Artificial Intelligence,
Augmented Reality, Internet of Things, Robotic Process Automation and
Block chain are trends that are reshaping how the Real Estate sector works.
For instance, AI is allowing for more productive location decision making, predictive
maintenance of assets, easing portfolio planning, reconfiguring work spaces,
automating FM processes and making space smarter. Similarly, IoT is allowing
for the construction of smart buildings and smart cities, while creating more
data for analytics also across portfolios, fine-tuning portfolio management
decisions and enabling more accurate valuations.
OFFICE MARKET OUTLOOK: DISRUPTING THE
DISRUPTIONS
The year 2018 was
a landmark one with office space absorption crossing an all-time high of 47 million sq. ft. (up 5% y-o-y) across
the nine leading cities, boosted by a supply influx of 35 million sq. ft. (up 17% y-o-y). Bangalore and Delhi-NCR
continued to dominate take-up; Hyderabad emerged as the third most preferred
office destination, overtaking Mumbai.
Market Outlook
trends expected to continue from 2018
o
Polarization
between cities: Demand and supply
would continue to be focused towards the most prominent destinations i.e., Bangalore, Delhi-NCR, Hyderabad and
Mumbai.
o
Infrastructure-led
growth: The pace of
infrastructure development will determine the growth and emergence of new
micro-markets; supply and demand will be influenced by infrastructure
completions, particularly provision of metro services/ major arterial roads.
o
Greater appetite
for SEZ’s/tech parks: With the sunset
date of March 2020 fast approaching(which will impact the benefits for
occupiers), heightened activity for both absorption and development completions
is expected in the SEZ and tech park
space in 2019.
o
Tech-driven real
estate decisions: Technology will continue to
impact occupier and developer decision-making, resulting in
increased flexibility in both space leased and released.
Office Market
Outlook for 2019: Expected in 2019
o
Absorption
trends: Leasing activity
in the sector will be driven by evolved sources of demand rising interest of
global occupiers, workplace changes due to digitization of jobs, evolving need
for flexibility, increased demand for domestic needs, rise in net absorption
and Core + Flexi workplace strategies. The combination of these sources of
demand, coupled with the supply influx of quality space is likely to result in
the share of net absorption to rise from the current 60-65% to about 70-75%
during 2019-20.The share of tech in overall space take-up in the country will
remain in the range of 30 – 35%by
the end of 2019.
o
Supply trends: We expect development patterns to be more
tech-tailored and anticipate a stronger pipeline in 2019. CBRE expects nearly 40 million sq. ft. of new office space
to be released over the next twelve months. Almost 30% of this pipeline is expected to be in the SEZ space. There is
also expected to be an impetus on “smarter”
buildings – driven by the augmented use of tech for optimizing space and costs.
o
Rental trends: We expect rents to continue to grow across the
key markets in Bangalore, Chennai and Pune, however, this growth is expected to
taper across most cities. ‘Gateway’ cities of Delhi-NCR and
Mumbai would also see rental growth, however only in select locations. Also, a
convergence between SEZ and non-SEZ rentals is expected in 2019.
LOGISTICS MARKET: ON THE
PATH TO TRANSFORMATION
2018 was a remarkable year
for the warehousing market as overall absorption during the year touched 24 million sq. ft., a growth of about
44% compared to the previous year. Majority of the demand was concentrated in
Mumbai (23%), Delhi-NCR (19%) and Bangalore (19%), closely followed by Chennai
and Hyderabad accounting for about 15% and 12% respectively.
Following the expected
trend, 3PL players, e-commerce and engineering &manufacturing firms drove
demand during the year
contributing about 35%, 23% and 15%
respectively. Markets which ledrental appreciation during the year were
Bhiwandi in Mumbai (23%), Western corridor in Hyderabad (20%), NH-6 in Kolkata
(16%) and Northern belt in Chennai (11%).
Logistics Outlook for 2019
o
Significant
supply addition expected; the share
of Grade A supply expected to increase in overall supply. While the overall
supply (grade A and inferior grade) for the sector is expected to be almost 60 million sq. ft. till 2020, at least
22 million sq. ft. of this supply is estimated to be in the grade A category.
o
Demand from
e-commerce players may slow
down in the short-term due to policy disruptions. However, in the long run, BTS properties to become more
commonplace for such players.
o
Favourable policy
framework and government focus on
infrastructure initiatives likely to spur further growth in the sector in 2019.
o
Focus on building in-city logistics, grocery delivery and cold chain facilities to
see more activity in the coming year.
RETAIL MARKET OUTLOOK:
CONSUMER GROWTH DRIVEN
The Indian retail sector has been
evolving at a fast pace in the past couple of years. Increasing urbanisation,
evolving brand preferences, availability of technology and social media have
been the driving factors behind this evolution. In 2018, nearly 5.1 million sq. ft. of new retail
developments became operational across the seven major cities in the country.
Supply was led by the Southern cities,
with Hyderabad at the forefront;
followed by Chennai and Bangalore.
Smaller retail developments also became operational in Delhi-NCR and Kolkata
during 2018.
Demand on the other hand has also been
strong and the past couple of years have witnessed a divergence in the demand
and consumption pattern of consumers in India. While fashion and apparel is
expected to continue remaining a key demand stream (value fashion, along with
mid-range fashion is expected to drive retail sales), but it has also given way
to categories such as F&B, multiplexes and entertainment centres, along
with accessories amongst others.
Retail Outlook for 2019:
o
Although nearly 10 – 12 million sq. ft. of supply is expected to come on-stream in
2019; demand is expected to outstrip supply. While changes in FDI norms for
e-commerce may impact online sales in the short-term, it may also impact
investor sentiment in the segment.
o
However, despite uncertainty across the e-commerce
segment, omni-channel retailing is
here to stay.
o
Diversification in demand to continue with expansion by various domestic
and international brands across newer categories.
o
Experiential retail and place making will be the key, landlords
and retailers likely to use tech for studying consumer patterns and enhance
customer experience.
CAPITAL MARKETS &
LAND OUTLOOK: STABILITY
TO ENSUE
During 2018, the commercial real
estate investment market witnessed few large-scale deals which led to about USD 4.7 billion of investments.
Transaction activity was led by private equity investors focusing on office and
retail sectors, while local investors focused on investing in land parcels for
RE developments. The inflow of long term, patient capital from private equity
and other institutional players – especially in office and retail has provided
the sector with stability that will ensure a steady growth curve.
The Capital Markets and Land outlook
for 2019:
o
The liquidity squeeze in the NBFC sector,
besides government policies and focus on due diligence, will lead to consolidation
in the sector.
o
PE investments are likely to focus on completed and
under-construction quality assets across the office, warehousing and retail
segments; residential sector
will continue to be dominated by debt funding.
o
As the due diligence process tightens, the
quality of loans is also anticipated to improve, however, as a result funding
costs may rise.
RESIDENTIAL MARKET
OUTLOOK: PATH TO RECOVERY CONTINUES
Post the policy
reforms of 2017 such as demonetization, RERA and GST, the residential market is
absorbing the impact of these changes and is on the path to recovery. This led to a growth of about
15% y-o-y in new supply and 13% y-o-y in
sales.
As developers
align themselves with structural policy reforms implemented in the past few
years and with changing characteristics of demand, we can expect residential
supply to improve in 2019. The residential market is better placed this year as
speculation-led investment activity has reduced significantly and financial
checks are in place to prevent over-gearing. In terms of segments, mid-end
projects will still garner the major chunk of supply, followed by the
affordable segment (owing to government incentives and increase in end-user
demand). The uptick in launches is expected to be witnessed in Bangalore,
Mumbai, Hyderabad and Chennai, whereas launches in Kolkata and Pune are
expected to be stable.
The Residential Market Outlook
for 2019:
o
Supply- demand scenario is expected to improve, unsold
inventory levels to further decline.
o
Alternate assets such as co-living, student and senior housing will continue to garner
greater interest from end-users and developers.
o
Affordable
housing will drive
supply and demand, backed by several government reforms
o
In the affordable segment, developers are
likely to draw up appropriate marketing strategies, phase-out launches and defend
their margins by managing construction costs. Greater use of tech and
tech-enabled construction techniques can assist in better execution of
projects.
About CBRE Group, Inc.
CBRE Group, Inc.
(NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles,
is the world’s largest commercial real estate services and investment firm
(based on 2016 revenue). The company has more than 75,000 employees (excluding
affiliates), and serves real estate investors and occupiers through
approximately 450 offices (excluding affiliates) worldwide.
CBRE offers a broad
range of integrated services, including facilities, transaction and project
management; property management; investment management; appraisal and
valuation; property leasing; strategic consulting; property sales; mortgage
services and development services.
Please visit our website at www.cbre.com.
Follow
us:
Bidisha Suri
Ms.
Vandana M
CBRE South Asia Pvt. Ltd Adfactors PR
Phone: +91 9999576965 Phone: + 91
9999479947
Email: Bidisha.Suri@cbre.com Email: vandana.m@
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