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Bengaluru offers highest REIT-worthy office space in the country: JLL
Live Mint  |  April 26, 2019

Madhurima Nandy Bengaluru

·        Bengaluru has REIT-worthy commercial office assets totaling 97.8 million sq. ft valued at around $10.7 billion

·        While Bengaluru occupies the large share of 33% of REIT-able space across key cities, Mumbai accounts for 17% share

 

Bengaluru will provide the highest REIT-worthy commercial office assets totaling 97.8 million sq. ft valued at around $10.7 billion, according to estimates by property JLL India, once again signalling that the city tops India’s office sector for being the most favoured city in terms of quality, volume and institutional investor interest.

 

The country’s commercial real estate market is estimated to provide 294 million sq. ft of REIT-able space from the existing office stock, according to JLL’s latest report titled India REITs—Heralding a New Era in Real Estate Investments released on Wednesday. These REIT worthy-assets would be valued at $35 billion.

 

While Bengaluru occupies the large share of 33% of REIT-able space across key cities, Mumbai accounts for 17% share at 49.7 million sq.ft worth $8.6 billion. Delhi NCR and Chennai follow both in space and value terms.

 

“What separates high-quality REIT-able office assets from the rest is that they are over 200,000 sq. ft in size, with less than 20% vacancy and are owned and managed by large institutional investors and developers rather than being sold to high net-worth individuals through strata sale. India’s overall commercial office stock would be around 541 million sq. ft," said Samantak Das, chief economist and head of research at JLL India.

 

The initial public offering (IPO) of Embassy Office Parks REIT, India’s first REIT to be listed, was fully subscribed during the three-day initial share sale in March.

 

The 97.8 million sq. ft of REIT-able space in Bengaluru includes Embassy REIT’s portfolio, which comprises about 33 million sq. ft of office space as on 31 December.

 

A real estate investment trust is an investment vehicle that allows people to invest in real estate and hold properties under it, and then lease it out to earn rental income.

 

In India, REITs are only allowed for holding commercial properties.

 

Rising transparency levels, progressive regulations and a robust commercial real estate market have made the commercial office segment a favourite among institutional investors, the JLL report said.

 

Investors have allocated nearly $17 billion in the form of direct investments as well as through entity-level investments between 2006 and 2019 in the office sector.

 

“The listing of India’s first REIT heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in the real estate market," said Ramesh Nair, chief executive and country head at JLL India.

 

"Growing knowledge of REITs will ensure acceptability and a gradual increase of interest from retail investors. We expect to see other asset classes like retail, warehousing and hospitality also offering REIT-able assets in the times to come."

 

According to JLL India's Das, the real estate sector has potential to offer an additional 101 million sq. ft of office space for REITs from the completion of new office space expected during 2019-21.

 

“...This could help upcoming REITs to gain from an upside in rentals as well as capital appreciation. While the strong institutional flow of funds into real estate will continue to provide initial momentum towards REITs’ growth in the country, active participation of insurance and pension funds in future will help in long-term growth of the market," he said.