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Cover Story

The rental yield for commercial property is usually 9-12%. In contrast, the yield for residen- tial property is much lower at 3-4%. The demand for office space in India is likely to stand at around 200 million square feet over the next five years. Post the GFC, the prices across most markets dropped around 35-40% and have bot- tomed out in most markets, of- fering investors a good oppor-

Shrinivas Rao, CEO, Vestian Global, Asia Pacific

are also expected to remain largely stable across most micro-markets in short term,” Shrinivas Rao, CEO, Vestian Global, Asia Pacific. According to Sushant Muttre- ja, Managing Director of Cos- mic Structure Pvt. Ltd., “I don’t think there is lack of demand as rentals in well connected lo- cations continue to attract ten- ants. Location holds the key. Where rentals are low, they are at realistic prices. Govern- ments of Haryana and Uttar Pradesh have to take initiatives on improving public transport.” Adds Vineet Singh, Business Head,, “overall, in the past few months, we have witnessed zero growth in office rentals in Delhi/NCR region. Areas such as Cen- tral Delhi, North Delhi and Noida have seen rise in rental prices while South Delhi and West Delhi have seen a drop. In Mumbai there has been a sluggish growth in office rent- als with the exception of Navi Mumbai which has registered substantial appreciation.”

Vacancy Woes 8 GIREM 101

cally small sized developments with limited amenities are witnessing high vacancy rates across the micro-markets and continue to command low rentals as compared to Grade A developments in the same micro-markets.

Ramesh Nair, Managing Director – West India, Jones Lang LaSalle India

tunity to buy into commercial real estate.

Says Rao, “vacancy in office space market is attributed to multiple factors including lack of infrastructure, poor con- nectivity and spurt in Grade B developments. Office space vacancy across major cities of India is modest and is pegged between 15 – 20%.” In certain markets due to high demand of office space from IT/ ITeS sector, Grade B developers rushed into commercial space development without adequate planning. These buildings, typi-

Investing Right India’s macroeconomic growth story makes for a rather com- pelling reason to get one’s own paragraph into it somewhere. Chosen prudently, and office real estate can let you do that in indelible ink. “Last year, the demand for office space across India was 30 million square feet – 50% higher than it was in 2009. The possibility of diversifying one’s portfolio, the sheer pride of ownership and the benefits of the longer leases that typify commercial tenants are other reasons to look at commercial real es- tate investing. The objective is not only make a profit on the sale of appreciated com- mercial property – the rental cash flows of a well-located office or shop space are con- siderable. Unlike in residential property, the income that can be generated from commercial property is what determines its value. In other words, the capitalization rate is actually the measure of the demand for the property. For those who do their homework well, investing in commercial prop- erty is a high-adrenaline and high-returns game that resi- dential real estate investment cannot hold a candle to,” says Ramesh Nair, Managing Direc- tor – West India, Jones Lang LaSalle India.

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