Warehousing, logistics to keep office realty buoyant

According to JLL top bosses, logistics has remained a high yielding asset class and in India it gives a return of 8 per cent. “There is an opportunity to diversify into a new asset class. Globally, companies that start as real estate developers are selling their portfolios to generate income for a more balanced portfolio. More mature markets transition from pure development to more investment play for an equal balanced portfolio,” Anthony Couse, CEO, Asia Pacific, JLL, tells us.

Nair says that Chennai arguably has the best market for logistics, warehousing and industrial real estate, along with Pune. The city has emerged as one of the two most preferred destinations for warehousing in the last 4-5 years. Chennai certainly needs to start exploring such asset classes to stay in the race. Even marquee hotels are now diversifying their portfolios by entering residential market. 

Nair is upbeat that with developers such as Embassy, Prestige, RMZ, Brigade, DLF and Ascendas launching their projects in the market, the realty scene is bound to look up shortly. Couse explains, “Ten years ago, technology was in its infancy. But now, global office demand is more from e-commerce, tech and retail companies, that did not exist a decade ago. The co-working segment accounts for 10 per cent of the office demand. This did not exist five years ago. As an emerging asset class, the logistics sector is huge. It is important for India to understand that to develop a mature office market, it needs to broaden its sources of demand and not be concentrated on IT and outsourcing companies.” 

In mature markets abroad, student housing, data centres and such asset classes are gaining prominence. With AI and robotics coming into outsourcing space, India needs to broaden its source of demand, he adds. 

When it comes to delivering a project, Chennai has recorded the lowest delay (by five months) compared to other markets in India, where the delivery – from the time of announcing a project to its handover – could run up to five years. Nair reveals that Delhi has emerged as the most affected with projects getting delayed by few years compared to the southern metro. 

Nair said, in Chennai, the vacancy in office space had dropped from 32 per cent in 2012 to 8 per cent.

“If we don’t create jobs, how will office space come up or even residential buys happen? When jobs are created, the residential demand also picks up,” he remarks. Though the residential market has been hit, the good news is buyers would rather invest in this market, where the prices been stable. “Last year, while prices in other markets plummeted, the price in the city went up by 2 per cent,” he says.