Bengaluru-based real-estate developer Prestige Group plans to commence construction of 18 million square feet (msf) of office space, with an annual rental income potential of Rs 800 crore- 1,200 crore, in the city within March 2024.
The Prestige Group is also looking at a foray into the Real Estate Investment Trust (REIT) market. An announcement in expected within 3-4 years.
An additional 9 msf of office space is under different stages of construction for the last 12 months in Bengaluru, Juggy Marwaha, chief executive officer of Prestige Office Ventures, told Moneycontrol.
"We are looking forward to developing about 40 msf of office space, across six cities in India, with an annual rental yield of Rs 3,000 crore within five years. The construction is ongoing and we are hoping for a rental yield within 3-5 years," he added.
Bengaluru, Mumbai, Delhi, Pune, Hyderabad, and Chennai are the six cities.
Four Bengaluru markets in focus
In Bengaluru, the company is looking to build major office parks across four key markets -- in the Outer Ring Road, northern Bengaluru, the eastern IT corridor of Whitefield and the central business district. They will be completely owned by the company.
Currently, the company has 11 msf of active office portfolio in southern India, out of which 6 msf is owned by the Prestige Group.
The company has almost doubled its office space portfolio over the past year, despite the slowdown in the US and European markets.
The gross absorption of office space in Q4FY2022 was about 21 percent lower than the average seen during Q1-Q3 of FY2022, a recent report by a real-estate consultant said.
However, Marwaha said that like the residential real-estate sector, the office segment is undergoing major consolidation.
"In every key market, hardly 4-5 players can provide quality office spaces. Thus despite the global headwinds and banking crisis, demand remains buoyant. In fact, several other sectors continue to drive demand, like the banking sector," he added.
For example, Prestige Group recently leased out 1 msf of office space in Pune, which is still under construction, to the Bank of New York Mellon Corporation for an annual rent of about Rs 82 crore.
Demand for office space
Marwaha said the pandemic, coupled with the global slowdown, has led to a marginal dip in office-space absorption. However, in the post-pandemic backdrop, companies will require their own workplaces, especially with a major push in technology, he added.
Real-estate consultants said that the Prestige Group already has multiple projects and is backed by several investors. Very few developers are doing such large developments within a short period, they added.
Currently, Brigade Group, another Bengaluru-based developer, has about 12 msf of active office portfolio. Additionally, Puravankara has over 3.2 msf of office portfolio under construction. Tata Realty is currently foraying into the Bengaluru office segment, with 5 msf launches in the pipeline.
Foray into warehousing, REIT
Marwaha said the Prestige Group had already signed up with IndoSpace, an industrial and logistics partner, to develop Grade A warehousing, sprawling across two land parcels in Bengaluru.
Though the company did not share further details, he added that southern Bengaluru is a key market for data centres and warehousing owing to the recently launched Bengaluru-Mysuru Expressway.
"Due to a change of dynamics in the post-pandemic era, the e-commerce players have slowed down in their take-up of space. However, the manufacturing sector can be a game changer," he added.
Additionally, the Prestige Group is looking forward to foraying into Real Estate Investment Trust (REIT) in the future. The company did not share further details. However, Marwaha said Prestige plans to officially announce the developments within 3-4 years.
According to a recent report, the country’s rent-yielding Grade A office market comprises 393.7 msf of REIT-worthy assets worth over $61 billion for future listing.
Bengaluru leads the REIT-worthy office stock with a 32 percent share, followed by Delhi NCR and Mumbai.