Institutional investments into the office sector rose 2.5X YoY during H1 2023, at USD2.7 billion, signalling continued investor confidence in the growth & return potential of the sector. The share of office sector remained highest in the total inflows during H1 2023 at 74%, distantly followed by residential sector at 12% share. Led by office, institutional investment inflows into Indian real estate rose 43% YoY, at USD3.7 billion in the first half of 2023. Institutional investment inflows are already about 75% of the total inflows in 2022 despite a weak global economic environment. Hinging on the strong domestic economic outlook, the fundamentals of real estate asset classes including office, residential, amongst others remain strong & intact. Institutional investors have their bets on the office sector, on the back of increased opportunities, resilient demand and robust growth prospects over the next 2-3 years.
Sturdy & higher demand for Grade A office space, robust supply pipeline, enhanced transparency, and availability of exit avenues in the form of REITs amongst others have bolstered foreign investments in the office sector over the last 5 years. The first half of 2023 saw USD1.9 Bn of foreign investments in office assets, accounting for 71% of the total investments in the sector. Global investors continue to look at Indian office sector favourably, and have shown increased appetite for good quality income yielding Grade A office assets. While majority of the existing prominent office projects are already funded by top institutional investors, a healthy supply pipeline of more than 150 million sq ft (at different stages of development) across top 6 cities offers newer investment opportunities in the next 3 years. Investors in the spectrum are forming large Joint Venture (JV) platforms to deploy funds to tap the burgeoning opportunity and invest in upcoming office projects.
REITs have corporatised Indian office market and favourable regulatory reforms have attracted more investments into the sector. While merely 11% of Grade A office stock across the top 6 cities is presently listed as REITs, there is a further unrealized potential of additional 57%. Given the current pace of investments in the sector, we are well placed to unleash this potential to inch closer to our counterparts in the APAC region.
