GWS 2025: Offices will continue to dominate REIT space, say industry players

REIT industry players noted that the sector has performed well operationally despite challenges related to the pandemic

Top leaders of the office real estate investment trust (REIT) space said that offices will continue to dominate the segment, with Blackstone and Sattva-backed Knowledge Realty Trust filing papers for an initial public offering on Thursday, but the sector still has room to grow, with new opportunities in various real estate classes, such as warehousing, data centres, hospitals, and even the residential segment.

At a panel discussion on REITs at the Moneycontrol Global Wealth Summit 2025, all the three top executives- Alok Aggarwal, managing director and CEO of Brookfield Properties (which sponsors Brookfield India Real Estate Trust), Ramesh Nair, CEO of Mindspace Business Parks REIT, and Ritwik Bhattacharjee, CEO of Embassy Office Parks REIT- added that investors should consider REITs as part of their portfolio, which they termed an effective avenue for passive income.

In his remarks, Aggarwal, who also serves as managing director and CEO of Brookfield India Real Estate Trust, noted that despite concerns among investors about the unit price of REITs not moving substantially, the industry had to face multiple challenges over the past few years, from large corporates vacating offices during the pandemic, as well as high interest rates, and also pointed out that unit prices of REITs have been on the up since last year.

"Since Q1 and Q2 of 2024, REITs have been up by an average of 20-25 percent. Let's not forget that COVID was a once-in-a-lifetime event. Occupancies of large institutional players went down from around 95 percent to the early 80s. SEZ vacancies were an issue, and interest rates were high. But in the last 9 to 12 months, occupancy has gone up from around 80 percent to around 90 percent. Leasing momentum is back, and GCCs are also doing a great job. SEZ reforms have happened, and I would say that the best of times for REITs are there in the short, medium, and long term," Aggarwal said, during the panel discussion.

Aggarwal added that while institutional investors needed to be convinced about the merits of REITs as an asset class, he said that investors have realised that offices have no substitute, and are now interested in the asset class' rental growth and occupancy trajectory, as well as sustainability initiatives.

On the topic of whether REITs are equity or debt assets, as they have characteristics of both, Embassy REIT's Bhattacharjee remarked that investors should simply regard REITs as a "high dividend paying stock".

"We went through an existential crisis in the form of COVID, and the rate reversal put a lot of plans (on hold). I think we are at an early stage in the commercial cycle. Unfortunately, the distributions have not matched that, but right now, we are looking at a period of pretty high growth," Bhattacharjee added, noting that REITs have completed distribution of around Rs 20,000 crore through "volatile cycles".

The panelists noted that of the around 830 million square feet of office space in India, REITs collectively hold and manage around 10-12 percent, much less than that of economies such as the United States, with Aggarwal saying that assets under management for REITs may grow by 15 to 20 times over the two decades. However, industry observers have also expressed concerns over the paucity of Grade-A assets in India, with panelists saying that REITs are exploring multiple new asset classes.

"Close to 430 million square feet of the 830 million square feet of office space in India are owned by single landlord, institutional investors, or REITs. Every year, the market is adding around 50 million square feet. India has now become the office of the world, with hundreds of new global capability centres setting up in India...We are doing five data centres and three hotels, as well as more mixed-use campuses," Mindspace REIT's Nair said.