In the second quarter of 2023, institutional investments in the office sector reached a record high of US$1.8 billion, marking the highest figure in the past 10 quarters. This indicates sustained investor confidence in the sector’s growth potential and returns.
Furthermore, the office sector experienced a significant year-over-year growth of 2.5X in the first half of 2023, reaching US$2.7 billion. The office sector accounted for the majority of these inflows at 74%, closely followed by the residential sector at 12%.
Prominent global investment firms such as GIC, CapitaLand India Trust, Bain Capital, CPPIB, and PAG Credit and Markets continue to be actively involved in the sector, completing substantial transactions. With the expectation of increased opportunities, steady demand, and strong growth prospects over the next 2-3 years, institutional investors are betting on the office sector.
Despite a sluggish global economy, institutional investment inflows into the Indian real estate market, particularly the office sector, have grown by 43% year-over-year, reaching US$3.7 billion in the first half of 2023. These investments accounted for 75% of all inflows in 2022.
Foreign investments in the office sector have risen in the past five years due to factors such as a stable and increasing demand for Grade-A office spaces, a robust pipeline of supply, improved transparency, and the availability of exit strategies like real estate investment trusts (REITs).
The top six cities in India have a solid supply pipeline of over 150 million square feet across various stages of development, presenting new investment opportunities for the next three years, even though many of the existing significant office projects are already funded by top institutional investors.
According to Vimal Nadar, Senior Director and Head of Research at Colliers India, the office sector is expected to witness increased investments from both global and domestic investors in the coming years, alongside the expansion of REITable office stock. Investments in the residential sector have also intensified in conjunction with improvements in housing demand, stable interest rates, and strong affordability levels.
During the first half of 2023, the residential sector experienced a noteworthy five-fold increase in investment inflows, reaching US$433.4 million, largely driven by domestic investments. Additionally, there was a doubling in investment inflows into industrial assets, attributed to the sector’s ongoing expansion in response to increased consumption.
