Analysis of the commercial property rental market in India
The relevance of research
Commercial real estate includes offices, shops, shopping centers, production and storage facilities, sports facilities, hotels, as well as other objects intended not for residence, but for business. 2020 has brought many challenges to the commercial real estate market. The consequences of the pandemic and the general uncertainty motivated investors to look for the most stable investment segments.
Purpose of the study
Analysis of the state of the commercial real estate rental market, assessment of the market size, analysis of competitors, as well as identification of factors affecting the commercial real estate rental market
Content
Part 1. An overview of the Indian commercial rental market
1.1. Definition and Characteristics of the Indian Commercial Property Rental Market
1.2. Dynamics of the volume of the Indian commercial property rental market, 2016-2020
1.3. Market structure by type of service provided in India
1.4. Structure of the commercial real estate rental market by Union Territories
1.5. Assessment of current trends and development prospects of the studied market
1.6. Assessment of factors affecting the market
1.7. Analysis of sectoral indicators of financial and economic activity
Part 2. Competitive analysis in the commercial property rental market in India
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Commercial real estate rental consumption analysis
3.1. Estimated per capita consumption of commercial property rentals
3.2. Market Saturation and Estimated Market Potential in India
3.3. Description of consumer preferences
3.4. Price analysis
Part 4. Assessment of factors of investment attractiveness of the market
Part 5. Forecast for the development of the commercial real estate rental market until 2025
Part 6. Conclusions on the prospects of creating enterprises in the study area and recommendations for current market operators
Research excerpt
Part 1. An overview of the Indian commercial rental market
1.1. Definition and Characteristics of the Indian Commercial Property Rental Market
Commercial real estate includes offices, shops, shopping centers, production and storage facilities, sports facilities, hotels, as well as other objects intended not for residence, but for business.
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2020 has brought many challenges to the commercial real estate market. The consequences of the pandemic and the general uncertainty motivated investors to look for the most stable investment segments. Warehouse real estate turned out to be one of these sectors - a significant increase in the share of investments in the segment was due to its resilience to economic shocks, as well as the functional characteristics of these assets, which during the crisis turned out to be an important element in the redistribution of goods in the economy.
Quality offices and shopping centers are also an attractive investment option and will be in demand, especially after the coronavirus situation stabilizes, when people can return to their normal lives.
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1.2. Dynamics of the volume of the Indian commercial property rental market, 2016-2020
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The assessment of the volume of the commercial real estate rental market was made by GidMarket analysts based on the dynamics of revenue from the rental of the TOP-30 largest landlords in the study period. The data for 2020 is forecast, as the company's rental income as of 20.01.2021/ / has not yet been published.
At the end of 2017, all segments of the commercial real estate rental market showed positive dynamics, and therefore the market volume increased by …%. In contrast to 2017, the demand for commercial premises in 2018 was formed not only by relocations in order to optimize rental costs, but also by the need of companies to increase the area occupied by the office and improve its quality, associated with the improvement in the financial condition of a number of companies, mainly in the IT sector as well as retailers.
In 2018, due to sanctions, the volume of investments in commercial real estate became the smallest for the entire period under review, and therefore, already in 2019, there is a decrease in the indicator by …%. The focus is shifting to the regions.
At the end of 2020, due to delays in rental payments and reductions in costs by tenants, including due to moving to cheaper commercial premises, the volume of the commercial real estate rental market amounted to … billion Rs., which is below the maximum in 2018 by …%
Diagram 1. Dynamics of the volume of the commercial real estate rental market, 2016-2020, billion Rs.
1.3. Market structure by type of service provided in India
Among the vacant premises of commercial real estate leased in Jan. 2021, office premises account for the largest share – …%, retail premises occupy …%. The third place is occupied by free-use premises – …%. Warehouse and industrial premises account for ….% and …%, respectively.
1.4. Structure of the commercial real estate rental market by Union Territories
The assessment was based on indicators of revenue from rent and management of own or leased non-residential real estate according to Rosstat.
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Chart 3. Structure of commercial real estate leasing in India by Union Territories, Jan-Sep. 2020, %
1.5. Assessment of current trends and development prospects of the studied market
Trends:
- Transfer of the majority of employees to remote work, which prompted the business to change both the format of work and the approach to organizing offices;
- Increasing the supply of sublease, the growth of the coworking segment and the reorganization of office spaces;
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Perspectives:
- The presence of a comfortable flexible space will become an obligatory attribute of a modern high-quality project;
- Increasing the area of premises for commercial lease, which will allow changing the configuration of the space, making it more balanced, functional and safe;
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1.6. Assessment of factors affecting the market
Consider the main factors affecting the market and, accordingly, demand.
Economic
Dynamics of GDP. GDP is a macroeconomic indicator that reflects the market value of all final goods and services produced in a year in all sectors of the economy on the territory of the state for consumption, export and accumulation.
The dynamics of India's GDP is decisive in the vector of development of the entire economy of the country and determines the key trends in consumer effective demand and economic activity.
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Diagram 4. Dynamics of India's GDP, 2012-Q3 2020, % to the previous year
Concluding the assessment of the factors affecting the Indian commercial property rental market, we will summarize the key ones in the framework of the STEP-analysis.
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1.7. Analysis of sectoral indicators of financial and economic activity
During the study period, the gross profitability in the field of commercial real estate leasing is significantly higher than the gross profitability of all industries as a whole. According to GidMarket, in 2020, the gross margin in commercial real estate rental amounted to …%, exceeding the figure for all sectors of the economy by … p.p.
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At the same time, the profitability of profit before tax in the field of rental of commercial real estate in the entire period of the study (except for 2018) is also higher than the same indicator for all industries in India. In 2020, the profitability before tax in the field of commercial real estate lease amounted to …%.
In general, during 2016-2020. there is a trend of reducing the profitability of profit before tax in the field of commercial real estate lease.
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Part 2. Competitive analysis in the commercial property rental market in India
2.1. Major players in the market
Every year, Forbes publishes a ranking of the largest rentiers in India, whose real estate allows them to earn the highest rental income. Kyiv Ploshchad has been the unchanging leader for several years now.
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2.2. Market shares of the largest competitors
According to GidMarket estimates based on Forbes data, the market leader is Kyiv Ploshchad with a share of …%, Tashir is in second place with a share of …%. Safmar closes the top three with a share of …% in the Indian commercial real estate rental market.
Diagram 6. Shares of the largest competitors in the commercial real estate rental market in 2020
2.3. Profiles of major players
The main source of income for God Nisanov and Zarakh Iliev's Kievskaya Ploshchad is the lease of retail space and the hotel business. The company owns the Evropeisky shopping and entertainment center, the Radisson Collection Moscow hotel (Ukraine hotel), the largest clothing markets Sadovod and """" and the largest food trade complex in Europe ""Food City"". In addition, the company is reconstructing the Olimpiysky sports complex.
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The group includes about 200 structures in different sectors of the economy. The holding manages rental space in its own shopping center ""Rio"", a network of cinemas and restaurants, is engaged in construction and wholesale trade, supplies electricity, installs lighting on facades. For 21 years, the company has implemented 67 projects on 2,5 million square meters. m. In 2020, Tashir closed a deal to purchase from RusHydro 90% of Armenia's largest electricity producer MEK CJSC, won a tender for the construction of a transfer hub in and expanded its own retail networks.
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Commercial real estate in the group is handled by A.N.D. Corporation JSC, MLP Management Company and Pioneer Estate LLC
A.N.D. Corporation is engaged in a full cycle of services in the commercial real estate market - from investment consulting, concept development and pre-project work on new facilities to engineering and technical operation management, commercial management and marketing support for existing facilities. Manages office, shopping and shopping and entertainment centers, retail premises in the street retail format and multifunctional complexes in the Moscow region.
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According to GidMarket estimates, the total revenue of the TOP-5 largest operators of the commercial real estate rental market in 2020 decreased compared to 2019 by …%. The fall began back in 2019. In general, for the period 2016-2020. the total revenue of the largest companies decreased by …%.
Diagram 7. Dynamics of the total revenue of the largest operators of the commercial real estate rental market (TOP-5) in India, 2016-2020
Part 3. Commercial real estate rental consumption analysis
3.1. Estimated per capita consumption of commercial property rentals
Commercial real estate rental consumption in general in 2016-2019 shows growth – the indicator increased by … Rs., however, at the end of 2020, the indicator decreased by … Rs. up to ... per inhabitant of India.
Diagram 8. The volume of commercial real estate rental consumption per capita, 2016-2020, Rs./person
3.2. Market Saturation and Estimated Market Potential in India
The commercial real estate market in India, despite the current excess of supply over demand, is still not saturated enough.
According to experts, the Indian commercial real estate market has the highest growth potential in the Eastern European region. The investment market is expected to revive, mainly due to the consolidation and consolidation of asset portfolios, even in the face of sanctions and the absence of foreign investors. According to GidMarket, the market may grow by …% in the medium term. The main driver will be an increase in demand for warehouse space due to the rapid development of online trading, as well as flexible offices and co-working spaces.
3.3. Description of consumer preferences
For different types of commercial real estate, different criteria are important to consumers. For example, warehouse facilities that store food products are often subject to the requirements necessary for storing products: enclosing structures without voids from materials that are not destroyed by rodents; solid and void-free canvases of external doors, gates and manhole covers; devices for closing the openings of the channels of ventilation systems, etc.
However, we highlight some common features that unite the preferences of tenants of commercial real estate. The main ones, according to GidMarket, are: various features of communications (uninterrupted power supply, Internet, availability of bathrooms, etc.) - ... points, location - ... points and infrastructure (presence of a cafe in the immediate vicinity, free parking, building security) - ... points.
Less important criteria include the quality and level of repair - ... points, the functionality of the layout - ... points and other bonuses that can potentially improve the productivity of tenants (Wi-Fi router, coffee machine, comfortable furniture) - ... points.
Diagram 9. The importance of criteria for choosing commercial real estate for rent by consumers, points
We also note that the requirements for the quality and level of repair of premises are gradually increasing. The owners of some business centers category ""D"" invest money received from the rental of premises in the refurbishment and renovation of buildings. Therefore, at an affordable price, small businesses can find not the most presentable, but nonetheless comfortable premises.
3.4. Price analysis
After the fall of the index in 2016, in 2017-2018. the indicator stabilized, and in 2019 it showed an increase by …%. In general, in 2020, rental rates did not decrease, on the contrary, they showed a slight increase (this was due to the growth of the dollar and a small increase in vacant space in expensive offices since the start of the pandemic).
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List of diagrams
Diagram 1. Dynamics of the volume of the commercial real estate rental market, 2016-2020, billion Rs.
Diagram 2. Structure of the commercial real estate rental market by types, %, Jan. 2021
Chart 3. Structure of commercial real estate leasing in India by Union Territories, Jan-Sep. 2020, %
Diagram 4. Dynamics of India's GDP, 2012-Q3 2020, % to the previous year
Diagram 5. Monthly dynamics of the US dollar against the rupee, Rs. for 1 US dollar, 2015-Jan. 2021
Diagram 6. Dynamics of the population of India, million people, as of 01 Jan. 2012-2020, Nov. 2020
Diagram 7. Dynamics of real incomes of the population of India, % to the previous year, 2012-Q3 2020
Diagram 8. Profitability of profit before tax (profit of the reporting period) in the field of rental of commercial real estate in comparison with all sectors of the Indian economy, 2016-2020, %
Diagram 9. Current liquidity (total coverage) in the field of commercial real estate rental for 2016-2020, times
Diagram 10. Business activity (average term of receivables turnover) in the field of commercial real estate lease, for 2016-20202, days days
Diagram 11. Financial stability (security of own working capital) in the field of commercial real estate rental, in comparison with all sectors of the Indian economy, 2016-2020, %
Diagram 12. Shares of the largest competitors in the commercial real estate rental market in 2020
Diagram 13. Dynamics of the total revenue of the largest operators of the commercial real estate rental market (TOP-5) in India, 2016-2020
Diagram 14. The volume of commercial real estate rental consumption per capita, 2016-2020, Rs./person
Diagram 15. The importance of criteria for choosing commercial real estate for rent by consumers, points
Diagram 16. Forecast of the volume of the commercial real estate rental market, 2021-2025 – under the scenario of one quarantine, billion Rs.
Diagram 17. Forecast of the volume of the commercial real estate rental market, 2021-2025 – under the scenario of two quarantines, billion rubles
List of tables
Table 1. Number of legal entities and individual entrepreneurs in India, units, 2019-2021
Table 2. STEP analysis of factors affecting the commercial real estate rental market
Table 3. Gross Margin in Commercial Property Leasing vs All Industries in India, 2016-2020, %
Table 4. Absolute liquidity in commercial property leasing compared to all sectors of the Indian economy, 2016-2020, times
Table 5. Main companies participating in the commercial real estate rental market in 2020
Table 6. Basic information about participant No. 1 of the commercial real estate rental market
Table 7. Basic information about participant No. 2 of the commercial real estate rental market
Table 8. Basic information about participant No. 3 of the commercial real estate rental market
Table 9. Basic information about participant No. 4 of the commercial real estate rental market
Table 10. Basic information about participant No. 5 of the commercial real estate rental market
Table 11. Basic information about participant No. 6 of the commercial real estate rental market
Table 12. Consumer price indices in the commercial real estate rental market in India in 2016-2020, %
Table 13. Average prices in the commercial real estate rental market across the Union Territories, 2020, Rs./sq. m
Table 14. Assessment of the impact of recent crises on the industry
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