Even though the concerns have increased after reaching the top of the residential real estate market, the landscape for the office real estate remains strong. The listed Real Estate Investment Trust (RITS) will benefit from the ever -increasing demand in the region.
The latest HSBC report has given initial indication of recession in the residential area. Analysts Puneet Gulati and Akshay Malhotra have described factors such as the decline in the sales of houses, good and poor performance of a city, stability in the size of the apartment and reaching the lower level of the number of houses sold without the number of houses sold.
While some brokers have cut estimated and price goals for listed residential companies, commercial real estate and retts have caught investors’ attention. These shares have performed better this year than the major indices, which due to sustainable leasing activities and frequent dividends.
Has happened
According to Jefferies Research analyst Abhinav Sinha, after two years of poor performance, the office retts has so far overtaken the BSE Realty Index this year by 20-30 percent points. They explain the reason for strong office demand, decreasing rewards and less evaluation than net asset value, which has given a large support to Rites despite weakness in major markets.
Sahara from rising demand
The main reason for Rit’s performance has been an increase in demand for office space. According to the report of Kushman and Wakefield, a record net leasing of 5 crore sq ft (MSF) was seen in India’s office market in 2024, which is 16 percent higher than the last high level of 2019.
The rate of vacant space has also come down to 16 percent, which is the lowest after epidemic as the new supply remained limited to 4.3 million square feet. This led to a decline of 220 basis points in the level of empty space.
Demand was helped from information technology and allied sectors which contributed 30 percent of the total lease. This was followed by banking, financial services and insurance (17 percent), engineering and manufacturing (17 percent) and flexible workspace (14 percent).
According to CBRE, in the last four years, especially flexible (flexi) workspace has gained popularity due to capital efficiency, cost savings, employee welfare and operational outsourcing. Since the year 2018, the total flex space has increased four times to 8 million sq ft, which is increasing at an annual rate of 24 percent. It is estimated to reach 12.5 million sq ft by 2027.
Landscape and investment trends
Rajshree Murkute, senior director and chief Rajshree Murkute in corporate and infra ratings in careers ratings, believes that there is a possibility of further boom in the Indian Rit market as it will help with strong plans of upcoming retain offers and good quality retainable assets. He is expected to increase grade A commercial real estate and continuous growth from investors in various fields.
Jefferies Research suggests that a decrease in office supply and a possible increase in fares may increase evaluation. Also, the net asset value can also increase. The firm has rated the Embassy Office Park Rite and Mindspace Business Parks Rite.
Geojit Research has taken a positive stance on Mindspace Rit and Brookfield India Real Estate Trust in view of strong distribution growth, improved occupancy rate, increase in fare, existing projects and merger opportunities.
JM Financial Research has described Embassy Office Parks as its main choice. It says that the company has leased 5 million square feet in the first nine months of 2024-25 (FY 2025) and will meet its full year’s leasing target of 65 million square feet. His 74 million square -foot construction projects are strengthening further development possibilities.
Analyst Sumit Kumar has predicted a 12 per cent increase in operating income during the year 2026-27 and maintains a rating rating with a price target of Rs 425, indicating a potential return of 23 per cent. This includes 7 percent dividend return and 16 percent capital increase.
ICICI Securities upgraded the Nexus Celling Trust last month and said that the potential benefits from mark-to-market opportunities will be 5-6 percent of the portfolio fare hike and price-wide acquisition sleep after 2025-26 and thus can promote 6-7 percent annual capital price in addition to the distribution return.
First Published – March 23, 2025 | 9:42 pm IST