The country’s rent-yielding Grade A office market comprises 393.7 million square feet of real estate investment trust or 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 at 15 percent and Mumbai at 14 percent, data from real estate consultancy JLL showed.
Office spaces managed by REITs have experienced significant growth, expanding threefold from 24.8 million square feet as on March 31, 2019, to 74.4 million square feet as on March 31, 2023. The revenues of REITs have seen a significant increase due to their ability to raise portfolio lease rentals, posting a compound annual growth rate of 5.5 percent over the past three years, compared to 2 percent for comparable non-listed assets.
India has so far witnessed the successful listing of three office asset-based REITs, garnering a robust response from institutional and retail investors since 2019. These are Embassy Office Parks, Mindspace Business Parks and Brookfield India Real Estate Trust. Nexus Select Trust, which is India’s first retail REIT and is backed by the global private equity major Blackstone, was listed this month.
“India’s office segment has been the sweet spot for global investors due to strong demand growth coupled with lower vacancy levels and rising rentals. Institutional investments in office space stood at $ 28 billion during 2005-22, accounting for a 42 percent share of the total investments across all real estate segments,” said Samantak Das, Chief Economist and Head of Research and Real Estate Intelligence Service, India, JLL.
“Retail and hotels have experienced robust demand following the pandemic, resulting in revised asset pricing. Warehousing has also witnessed significant growth in recent years, with global funds aggregating these assets through platforms. The listing of these asset portfolios through REITs represents the next logical step,” said Lata Pillai, Senior Managing Director and Head of Capital Markets, India, JLL.
REITs are investment vehicles that own, operate and manage a portfolio of income-generating property for regular returns. REIT-able properties in India include commercial assets―primarily office spaces―that can generate steady rental income. They operate like mutual fund units or shares.
