In Q2 of 2023, institutional investments in the office sector reached US$ 1.8 billion, the highest over the previous 10 quarters, indicating continued investor confidence in the sector’s potential for growth and return.
The segment also experienced a 2.5X year-over-year (YoY) growth in H1 of 2023, reaching US$ 2.7 billion, with the office sector accounting for the majority of inflows at 74%, closely followed by the residential sector at 12%.
Global investment firms including GIC, CapitaLand India Trust, Bain Capital, CPPIB, and PAG Credit and Markets continue to be engaged in the sector and have closed some sizable transactions. On the strength of expanded opportunities, steady demand, and strong growth prospects over the following 2-3 years, institutional investors have placed their bets in the office sector.
In spite of a sluggish global economy, institutional investment inflows into Indian real estate, led by the office sector, increased 43% year-over-year to US$ 3.7 billion in the first half of 2023. This investment has accounted for 75% of all inflows in 2022.
Over the past five years, foreign investments in the office sector have increased due to factors such as stable and rising demand for Grade-A office space, a strong pipeline of supply, increased transparency, and the availability of exit strategies such as real estate investment trusts (REITs).
A solid supply pipeline of more than 150 million square feet (at various stages of development) across the top six cities offers newer investment prospects in the next three years, even if the majority of the existing notable office projects are already funded by top institutional investors.
According to. Vimal Nadar, Senior Director and Head of Research, Colliers India, “The sector is expected to witness a further push in investments from both global and domestic investors alongside scaling up of REITable office stock in the coming years. Along with the office sector, investments in the residential sector have also intensified.”
Improvements in home demand, stable interest rates, and strong affordability levels have all contributed to a recovery in residential asset investments. During the first half of 2023, the residential sector had an impressive five-fold rise in investment inflows, reaching US$ 433.4 million, largely driven by domestic investments. A roughly two-fold rise in investment inflows into industrial assets was also observed, driven by the sector’s continued expansion in the face of increased consumption.
