India’s real estate office market is set for a bright future, according to a recent report by HSBC Global Research. Despite underperformance over the past five years, India’s office Real Estate Investment Trusts (REITs) have started to show positive signs of growth in recent months. The report suggests that there is still room for upside potential, as the market has yet to fully reflect the strong fundamentals that underpin it.
Since 2011, office rentals in India have been consistently growing, however, the stock prices of office REITs have not followed suit. This disconnect presents an attractive opportunity for investors, as current valuations are deemed to be attractive. The report also highlights the bullish outlook for the Indian market, noting that Grade A office rents have been steadily increasing since 2001, positioning India as a resilient player in the global office market.
Despite the challenges posed by the COVID-19 pandemic, the Indian office market has remained largely resilient, with rental rates staying stable even during lockdowns. Analysts are confident in the market’s stability, citing moderate annual rental growth rates as a contributing factor. The demand for office space is further driven by the outsourcing trend, with multinational corporations establishing global capability centers in India, accounting for a significant portion of total demand.
Overall, the report paints a promising picture for the Indian office market, backed by strong economic fundamentals and ongoing demand from multinational firms. As these companies continue to expand their operations in India, the office market is expected to benefit significantly. With attractive valuations and a structural upcycle in place, India’s office REITs are poised for growth in the coming months.
