The Indian industrial true estate has been on investors’ radar more than the previous couple of years owing to its powerful fundamentals and resilience. According to an estimate, it has attracted to the tune of USD 15.4 billion of equity investments given that 2011. Owing to the strategic place and infrastructural developments, NCR has accounted for the second-biggest quantum of PE investments given that 2011 (Knight Frank). The industrial sector picked up the pace involving 2014 and 2019 with increasing rental rates, consolidation of the established players and emergence of REITs. The year 2019 witnessed a record leasing of 42 million sq ft. till the pandemic stuck and threw the economy out of gear, albeit temporarily.
The renewal of financial activity in the Unlock phases, along with a spate of government initiatives, has set the pace for revival in true estate demand. According to a report, the third quarter of 2020 witnessed a whopping 138% enhance q-o-q in gross leasing volume to 14.7 million sq. ft. This improvement augurs properly for the industrial true estate to choose up the pace once again in 2021 amid the expectations of financial stability.
Real estate has traditionally been regarded as a secure and steady asset class for investment purposes. The industrial segment will continue to stay the preferred decision of investors in 2021 owing to assured and profitable returns on investment. Moreover, a prevailing sense of insecurity has also prompted NRIs to invest in Indian true estate. A Knight Frank report predicts the industrial yields in Mumbai, Bengaluru and NCR to stay steady in 2021.
The introduction of REITs in 2019 was a milestone for the industrial segment that has enhanced transparency and paved the way for investment in Grade A industrial spaces. The SEBI recommendations in this regard provide a transparent and secure avenue for raising funds by developers. Since its inception, the REITs listed in India have identified favour with investors owing to appealing yields of 7.5%-8% against 3-4% globally. The Brookfield Assets and Blackstone offers concluded in 2020 are indicative of the trend that will percolate into 2021 as properly, owing to REITs attractiveness.
As businesses mull relocated bases in the backdrop of a trade war involving the US and China, India is most likely to emerge as the major place of decision. A series of infrastructural developments, burgeoning population, the relative affordability of land and labour and improvement in the ease of undertaking company are appealing propositions for businesses seeking to establish their base right here.
The re-opening of offices, albeit with hygiene and security measures, will additional give a fillip to the demand for workplace spaces. Existing tenants will at some point return to the workplace and demand more region per sq ft for the very same workforce to adhere to the social distancing norms.
Nevertheless, we foresee some trends to refine the industrial segment in 2021. The issues of overall health, hygiene and wellness would invariably lead to the consolidation of the business in favour of organized developers. More and more developers are most likely to launch offerings that provide a sanitized atmosphere and an array of wellness amenities catering to overall health-conscious clients.
Facility management will assume a pervasive part in shaping consumers’ perception of workplace spaces. One can also anticipate true estate interactions to be aided by new technologies such as the use of Artificial Intelligence-primarily based chatbots and Virtual Reality headsets to strengthen efficiency and boost buyer experiences. Contactless technologies will be the essential to make sure sanitization and hygiene in workplace spaces. Moreover, transparency and a secure buyer expertise will be the principal metrics for occupiers to assess properties rather than the earlier metric of affordability.
Bolstered by conducive policy reforms, infrastructural developments and powerful fundamentals, the Indian industrial realty is poised to embark on a larger development trajectory and contribute to India’s financial story.
(By Ravi Singh, Head Communication, Viridian Group)