Mall rents growing faster than office rents: Study

The average appreciation in mall rents have crossed the rental growth in office spaces, according to a new study.

“In most of the retail malls countrywide, the average appreciation in rentals have been between 8 and 10 per cent per annum, as compared to the office space, where rents have been more or less steady, growing at 5-7 per cent per annum,” according to Emerging Trends in Real Estate Asia Pacific 2018, a report from PwC-ULI that conducted interviews among investors, consultants and others.

Quoting a Delhi-based consultant, PwC-ULI said the mall rents have grown not only because office assets have absorbed so much capital, but also because retail is starting from a lower base in terms of both asset quality and rental levels, providing investors better growth prospects.

The report said most international investors in the country continued to prefer commercial property, with cap rates averaging in the range of 8.5-8.75 per cent. It said that various large global opportunistic and institutional funds made big commitments to the Indian office sector — mainly in the form of business parks, and many of these early entrants were either consolidating their holdings or looking to exit via India’s nascent real estate investment trust (REIT) market, ”which is likely to see its first initial public offering (IPO) in the first quarter of 2018, according to several interviewees”, it said.

“With most high-quality pre-existing assets already accounted for, international funds are turning increasingly to build-to-core projects. One recent strategy is to tap land banks of local corporate owners in tripartite joint venture arrangements with domestic developers,” the report said.