Real Estate Outlook Positive for 2017: CBRE

2016 was a landmark year for the sector, with record absorption levels of over 43 million sq. ft. reflecting a 9% y-o-y growth. Bangalore and NCR dominated leasing activity; however, Hyderabad, in particular, witnessed a steep rise in occupier demand, with absorption more than doubling from 2015 to cross 6 million sq. ft. in 2016.

Office Market Outlook for 2017:

• High absorption levels and global investor interest will continue to bring life into India’s office sector.

• In 2017, the office sector is likely to maintain its momentum with an anticipated absorption of 40 million sq. ft.

• A strong trend of ‘pre-commitment’ in under constructed buildings

• IT/ ITES to continue to be the key demand driver for space across the country

• Most preferred micro markets to witness strong rental escalation

• Technology to play a key role, even as the occupiers are expected to keep a strong check on space utilization ratios and innovations in workplace strategies, while implementing their expansion plans

• Occupiers are likely to follow this trend of ‘flight to value’, while also using space utilization strategies such as workplace optimization and co-working spaces.

• Global occupiers to continue to account for sizable share of leasing activity, however we see a rise in activity from domestic corporates

• Demand for large sized spaces to receive a boost with the various consolidation/expansion/relocation initiatives of corporates

• Supply across the seven cities is expected to marginally rise in 2017. Completion delays likely to abate supply pipeline dominated by the top three cities, followed by smaller cities such as Hyderabad and Pune

The Indian retail real estate market witnessed continuous foray of international brands, completion of retail developments and robust demand during 2016.

Retail Outlook for 2017:

• The year 2017 is likely to be positive for the retail sector which is likely to witness an increased quality supply

• 7 million sq. ft. of additional Grade A supply is expected to hit the market; to be led by Southern cities. Hyderabad and Bangalore are expected to lead the fresh supply addition in the retail sector for 2017

• Demand for organized retail space will continue to exceed the supply.

• Consumption patterns are likely to mature due to increasing urbanization with upcoming retail developments to allow entry points for global retailers beyond the traditional epicenters of Delhi NCR and Mumbai.

• REITs will enable development of better quality malls and discourage strata-sale of properties. Implementation of Goods and Service Tax (GST) would lead to rationalization of tax at different levels with expected improvement in ease of doing business and movement of retail goods.

• 2016 witnessed a high level of investment activity in office, residential and retail sectors with active interest in the warehousing and hospitality sectors

• The Capital Markets and Land outlook for 2017:

• Office and residential expected to be main drivers; alternate sectors such as retail, warehousing and hospitality will gain prominence

• A secure & favorable regulatory environment expected to generate more interest from offshore investors

• Lower interest rates to reduce the cost of doing business, debt to still be most prevalent form of capital. Banks expected to be equipped with liquidity

• While core assets will continue to witness strong interest, there will be enhanced development interest in office, warehousing and retail sectors

• Several players expected to launch ‘affordable housing’ platforms

• Developers with strong delivery track record would continue to experience stable residential sales activity. Corporate houses to become increasingly prominent

• Land transaction activity to continue unabated. Joint Developments and Development Managements are increasingly being adopted

• 2017 expected to witness a significant increase in investments from family offices and HNIs into real estate