1. Private equity in office space recorded at Rs 56 bn in Q1 2017: Cushman & Wakefield

Private equity in office space recorded at Rs 56 bn in Q1 2017: Cushman & Wakefield

Office assets emerged as the most preferred segment for investments in the first quarter (Jan-Mar 2017) for private equity investments in real estate (PERE).

By: | Published: May 23, 2017 11:47 AM
Residential assets claimed 37% of total investments at Rs 36.2 bn during Q1 2017, recording an increase of 59% over the same time last year with an average deal size of Rs 1.8 bn.

Office assets emerged as the most preferred segment for investments in the first quarter (Jan-Mar 2017) for private equity investments in real estate (PERE). This asset class recorded investments to the tune of Rs 56.3 bn, which constituted 59% of the total investments made during the period, according to international property consultants Cushman & Wakefield.

This has been the highest PERE inflow in office assets since 2009. During the quarter, the segment also noted an increased inflow by 90% year-on-year in Q1 2016 with an average deal size of Rs 9.4 bn. Residential assets claimed 37% of total investments at Rs 36.2 bn during Q1 2017, recording an increase of 59% over the same time last year with an average deal size of Rs 1.8 bn.

Private Equity Investments in Real Estate (PERE) in Q1 2017

ANNOUNCED PE DEALS: CITY-WISE – VOLUME – (INR bn)

Period

Mumbai

Delhi-NCR

Bengaluru

Pune

Chennai

Hyderabad

Q1 2017

47

12

13

2

3

4

Q1 2016

41

37

2

0.6

8

7

Q1 2015

5

10

9

3

5

0

Q1 2014

21

6

20

6

0

0

Q1 2013

5

0.8

1

7

2

0

Q1 2012

33

7

6

0.4

0

2

Source: Cushman & Wakefield Research, Real Capital Analytics

Anshul Jain, Managing Director, India, Cushman & Wakefield, said, “Office assets receiving a record investment inflow indicates investors’ confidence in this asset class. The office space is expected to continue to see more interest from the investors in the coming years. By the end of the year, we are expecting to see at least 2 -3 large portfolio level deals that would be further pushing the total PERE in office market. These can be seen as signs of maturity of the market and a commitment from the funds for a long-term partnership with developers.”

“Investment market in India has been going through some challenges that of appropriate properties for investment. In the recent times, when investors have been cautious about the long term promise of the properties, there will be a dirt of good products in the next few quarters owing to fewer upcoming properties in key markets. While expected office supply is on a slowdown mode, residential projects too seem to have gone back to drawing boards reducing the supply in the coming year. This said, PERE is expected to remain positive in outlook for 2017, especially in anticipation of the first REITs listing which is expected to happen this year,” he said.

Overall PERE investments declined by a marginal 4.6% in Q1 2017, to Rs 95.9 bn from Rs 100.5 bn in Q1 2016. The largest y-o-y dip was seen in retail owing to a very cautious development in the retail segment. Most developers are extremely sensitive towards creating retail space due to the changing dynamics of the market. Mixed-use also saw a decline in total value of investments in the same period.

MUMBAI: During Q1 2017, Mumbai was the preferred location for investments, accounting for 49% of the total investments at Rs 47 bn. Within Mumbai, commercial office assets accounted for the majority share (77%). Led by a couple of significant transactions by a foreign fund and a joint venture between a foreign fund and domestic developer, the investments were valued at Rs 36 bn. This was followed by investments in the residential assets valued at Rs 10.4 bn. almost all the investments in the city were made at an SPV level.

BENGALURU: Following Mumbai, Bengaluru accounted for 13% of total investments at Rs 12.5 bn. Within the city, residential asset class took predominance accounting for a share of 34.5%, the largest in residential investments. This was primarily because the Bengaluru market is considered to be predominantly driven by end-users.

Delhi NCR: Delhi NCR, which received Rs 11.7 bn and had previously seen healthy volumes of investment, saw a decline of 32% y-o-y in terms of total inflows during the quarter. This was on account of lack of any major large sized transactions in the city in Q1 2017.

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