During the first half of 2023, institutional investment in the office sector increased by 2.5 times year-on-year (Y-o-Y), reaching $2.7 billion, according to a report by Colliers, indicating that investors continue to have confidence in the sector’s potential for growth and returns.
Institutional investors are particularly interested in the office sector due to increased opportunities, strong demand, and promising growth prospects over the next 2-3 years.
“The office sector’s performance in the first half of 2023 is astounding. We are witnessing increased opportunities, strong demand, and promising growth prospects over the next 2-3 years, making it an ideal playground for investors seeking lucrative opportunities. With the surge in institutional investment, now is the opportune moment to invest in the office sector, as it promises attractive returns and the potential to capitalize on India’s thriving economy & burgeoning business landscape,” says Mr.Sanchit Bhutani,Managing Director, Group 108.
“The growth of office spaces is being propelled by the rapid digitization and increasing demand for flexible work environments. Co-working spaces and remote work options have gained popularity, influencing office design and layout to accommodate diverse working preferences. Moreover, the government’s focus on promoting commercial hubs and smart cities is attracting multinational corporations, further fuelling the demand for premium office spaces in key urban centers. With a conducive business environment, the office segment is anticipated to witness heightened activity and significant capital appreciation, making it a lucrative investment avenue for stakeholders,Says Mohit Goel, MD, Omaxe Ltd.
Over the past five years, foreign investments in the office sector have been bolstered by several factors, including higher demand for Grade A office space, a robust supply pipeline, improved transparency, and the availability of exit avenues such as Real Estate Investment Trusts (REITs).
“Institutions and Foreign investors have played a vital role in boosting the office sector over the past five years. The lure of Grade A office spaces, coupled with an impressive supply pipeline and improved transparency, has made this market increasingly attractive, either for self-use or as an instrument of investment. As more companies and businesses expand their operations, the demand for high-quality office spaces has risen significantly.” Says Ajendra Singh VP-sales and marketing, Spectrum metro.
In the first half of 2023, foreign investments in office assets amounted to $1.9 billion, representing 71% of the total investments in the sector.
“The inflow of foreign investments into office assets during the first half of 2023 has been remarkable. This influx bodes well for the sector’s long-term growth and indicates a strong interest from global investors in India’s burgeoning commercial real estate landscape. The office scenario in the National Capital Region (NCR) is also witnessing a surge in demand, with businesses expanding and looking for Grade A office spaces to establish their presence in the country’s economic hub.,” says Pankaj Kumar Jain,MD,KW group.
While top institutional investors already backed many prominent office projects, a healthy supply pipeline of over 150 million square feet is under development across the six major cities, offering new investment opportunities over the next three years. Investors in this spectrum are forming large Joint Venture (JV) platforms to deploy funds and capitalize on the expanding opportunities in upcoming office projects.
Institutional investors have recognized the value of the office sector, as evidenced by the significant share of investment inflows at 74%. Its dominance over the residential sector, with a distant 12% share, further cements its position as a prime investment destination.