No option for global firms but to come to India: Brookfield's Alok Aggarwal

The need for companies to outsource is fundamental. There's no option for global firms but to come to India. India is a pool of talent. India's gross office absorption has been around 90 msf

Among the largest owner-operators of office space in the country, Brookfield is upbeat on the India market as it hosts nearly 1,700 global capability centres (GCCs), accounting for around 53 per cent of the total number of GCCs worldwide, according to Vestian. In an interview, Chief Executive Officer (CEO) of Brookfield India Real Estate Investment Trust (Reit) and Chairperson of Indian Reits Association Alok Aggarwal told Prachi Pisal in Mumbai, that the company may well double its Reit portfolio in India market in the next four-to-five years. Edited excerpts:

 

What do you think about the current fluctuating global environment and its impact on India’s commercial real estate?  

The need for companies to outsource is fundamental. There’s no option for global firms but to come to India. India is a pool of talent. India’s gross office absorption has been around 90 million square feet (msf) in the last two years. Some companies have decided to delay their decision. But largely, the story is very strong. 

It’s very imperative for global companies to have an India strategy. Those who don't have an India strategy are being questioned by their boards. 

How are GCCs driving office demand? 

Around 40 per cent of office space in India is taken by GCCs. The cost of setting up GCCs in India is only 10-15 per cent of what’s incurred in the US or Western Europe. The GCCs' demand  in India is also supported by talent arbitrage.

 

India has up to 1,800 GCCs. They are expected to grow to 3,000 in the next five-seven years. As much as  $50-60 billion of revenue is being created by these GCCs, which is expected to grow to $100-130 billion in an upside scenario.

 

Can you shed some light on Brookfield Properties’ current portfolio and expansion plans? 

We have a presence in nine cities. We started with 8 msf of portfolio in 2015. Today, it’s 60 msf. We are one of the largest owner-operators of office space in India. 

Our assets under management (AUM) have grown from $1 billion to almost $12 billion in the last 10 years. Hopefully, we can maintain that growth. If we do not double in the next five-to-seven years, I may be disappointed. 

We don’t have targets, but we are always ready for an opportunity. We'll keep investing as and when opportunities arise. Our focus would always be on investing in big assets and the best of the micro-markets. 

What are Brookfield’s plans for its coworking platform COWRKS? 

COWRKS has about 40 centres and 25,000 seats across Brookfield and third-party assets. We are planning to add 8,000 more seats soon. The growth that we are seeing for COWRKS can surprise our estimates, considering some of the new transactions that we hope to get done. 

Via COWRKS, we do the fit-outs on a speculative basis as per the needs of tenants. The typical cost is about ~3,000-3,500 per square foot (sq ft). Indian flex space operators have cracked the code well. In the first half of calendar year 2024 (H1CY24), they leased 12.4 msf of office space. They’re growing.

 

Brookfield Reit’s current portfolio is around 29 msf of total leasable area. What are the expansion plans? 

In the next four-to-five years, if our Reit portfolio doesn’t double, we will be disappointed. There’s a 15 msf portfolio in the South of India, across Bengaluru and Chennai, and Pune, with the sponsor group. That is something we will talk to the sponsor group about. We will be keen if we can acquire that. A time will come when third-party assets can also be looked at. For funding of these acquisitions, we already have some dry capital. Some money has already been raised. 

What do you think about equity status for Reits? 

If that happens, a lot of passive funds can flow into Reits, and it will give a lot of relief to Reits. It's important in the national interest and for commercial real estate, so that more and more developers can launch their Reits. They can free up their capital and use it to develop more campuses.