Commercial Real Estate Investment Promising
The sentiment on commercial real estate investment in Gurgaon is very favourable.
The mood of investors in Gurgaon’s commercial real estate is positive, as there is a sense of stability due to the recent policy adopted by the government to open up foreign direct investment into the retail sector.
The retail sector is forecast to grow handsomely after this announcement, and real estate will most certainly ride on back of this development.
Despite the disappointing economic picture, investor appetite for good quality real estate remains firm and is likely to continue to underpin capital values in prime locations like Golf Course Road, main Gurgaon Sohna Road, NH-8, etc.
These sectors will also directly benefit from the recently announced government policy to open up the country to more foreign direct investment.
Manish Agarwal, MD of Satya Group, says: “The occupier side of the market is a little more challenging with the flatter trend in occupier demand reflective of the more mixed macro picture.
“However, for the time being, rent expectations remains positive which may be partly linked to the subdued trend in development over the past few years.”
The NCR saw a significant decline in absorption, over 40%, in the first half of 2013 over the same period last year. Similarly, absorption in the second quarter of 2013, at 0.65 million sq ft, registered a decline of 17% compared to the previous quarter as occupiers remained cautious towards expansion and new space take-up.
Besides IT-ITeS and BFSI (Banking, Financial Services, and Insurance), telecom sector also registered healthy leasing activity during the quarter and contributed significantly to the total absorption. A total supply of 1.89 million sq ft was registered during the quarter, a q-on-q decline of nearly 4%. Both supply and leasing activity in the first half of 2013 marginally increased by 1% compared to the same period last year. The supply mainly constituted of commercial and IT buildings with no SEZ addition during the second quarter of 2013.
With slow supply additions and decline in leasing activity, the overall vacancy rate remained stable during the second quarter. Out of nearly 2.3 million sq ft of Grade A supply, which is expected to get added in the next quarter, 89% belongs to Gurgaon which is likely to take the vacancy levels of the micro market northwards.
The industry-wide cautious sentiment is expected to continue in the third quarter of the year with occupiers likely to evaluate relocation and expansion plans within the NCR.
Impact of Global Economics:
However, looking at the level of precommitments, corporate leasing activity is expected to improve soon. The bulk of the new supply is slated to enter the NCR market by early this year, primarily in Gurgaon, which may put a downward pressure on the rentals. On the other hand, rental values in locations across the CBD (central business district) and SBD (secondary business district) of Delhi are expected to register appreciation owing to anticipated office space demand and lack of fresh supply in these micro markets.
According to the latest RICS global commercial property survey, sentiment in real estate markets has been reasonably positive. In India, macroeconomic numbers for both industrial production and exports are showing a slightly better tone.
However, it is a little premature to be confident that this trend will prove to be sustainable in the long run. The better pattern for realty markets in the country is visible in the investment market, which is also starting to filter through to the occupier side as well.
In India, investment enquiries edged up and elicited a positive trend for the first time since 2011. Consequently, forward looking measures for expected transactions and capital values are also staying upbeat, spilling over from the positive results of the previous quarter.
Office market in Gurgaon:
Gurgaon contributes to nearly 43% of the new supply. Most of the IT- ITeS companies in Gurgaon are presently concentrated in DLF Cyber City while other locations like Sohna Road, Golf Course, and Golf Course Extension Road are essentially commercial and non-IT in nature. However, owing to constrained infrastructure, especially road network in DLF Cyber city, employees face several problems on a day-to-day basis including losing precious man-hours in traffic jams. Further, high real estate rentals for IT-ITeS space in DLF Cyber City have resulted in companies looking out for newer alternatives for office space.
According to a report of Cushman & Wakefield, Gurgaon is expected to see a sizable supply of 3.3 million square feet in the first half of this year, adding to the existing stock. Besides IT, non-IT sectors like consulting and BFSI are also expected to absorb the available spaces.
Hines, a globally networked company which is entering the Indian realty market for the first time, is developing Skyview Corporate Park on 21 acres in Sector 74A along NH-8, in partnership with the landowner, Shyam Telecom.
The master plan and design of the Skyview Corporate Park buildings has been created by Roger Soto, president/director of design for Odell Associates and former director of design for HOK’s Houston office. “The buildings will be among the first in India that meet a true international standard for Class A design and construction quality, and they will be LEED rated,” Yash Gupta, country head of Hines, said.
Office Space Absorption:
Gurgaon registered fresh office space leasing of nearly 0.60 million sq ft in the last quarter of 2012, amounting to 60% of the overall absorption in the NCR. Most of the transactions were seen in micro markets of DLF Cyber City, NH-8, Udyog Vihar, and Sohna Road. About 2.2 million sq ft of office space was absorbed in Q3 of 2012. This is much above the average quarterly absorption of the NCR market, which ranges anywhere between 1 million sq ft to 1.5 million sq ft. Some of the prominent transactions that took place in Q3 of 2012 were McKinsey, Ericsson, Income Tax Department, Samsung Electronics, Daffodil Software, Wipro, and KPMG. These constitute nearly 1.1 million sq ft of the total office space absorption. Considering the level of precommitments and the fact that transaction activity is typically conservative in the final quarter of any financial year, demand is expected to improve in the latter half of this year.
Despite the disappointing economic picture, investor appetite for quality real estate remains firm and is likely to continue to underpin capital values in prime locations like golf course road, main Gurgaon Sohna road, nh-8, etc.
Posted on August 16, 2013, in Real Estate and tagged 2 BHK and 3 BHK Flats in Delhi NCR, Builders In Delhi NCR, Flats in Delhi NCR, Houses in Delhi NCR, Real Estate India, Sanjay Rastogi. Bookmark the permalink. 14 Comments.