Commercial Real Estate Investment Essentials

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We all know the 'pandemic came and office realty hit a rough patch' story, so we will avoid that pickup line this time around. 

Instead, what's far more conversation-worthy are some big positive changes: 

1️⃣ India is slowly transforming from being an outsourcing hub, to a research and development destination for global companies 

2️⃣ We are one of the world's largest consumer markets for products and services today, and

3️⃣ More and more global brands are entering India to start manufacturing units and other large scale business ops.

And that signals that the one thing we are going to need a lot more of, is good quality office space. 

A Demand Uptick Is Underway

Per JLL, office realty saw net absorption of 11.56 million sq. ft in October-December 2021, the highest among the last eight quarters, and up by 86% QoQ. Net absorption was up 26% YoY in H2, 2021. Also, per experts, net office absorption is headed northwards from here on, for the next few years.

Zooming In

So, if you wish to invest in office realty/commercial real estate/CRE today, what must you know?

To The Penthouse

🔼 Rental yields range from 7.5-10% in commercial realty, compared to 2-3.5% in residential space

🔼 Long-term lease agreements mean predictable cash flows

To The Basement

🔽 Demand can drop quickly during economic slowdown or other disruptions

🔽 When an occupier vacates the property, a new one walking in is an uncertain event

🔽 You need deep pockets to own and maintain office realty

In One Sip

🎙 To earn attractive returns, investors must select the property carefully and conduct a thorough due diligence. “Location, occupier profile and entry and exit prices should be the key considerations. The property should be in a high-demand location and must have a stable occupier profile,” says Viral Desai of Knight Frank India.