Despite cautionary trends permeating the office sector, we expect 2018 to be a positive year. Office properties are expected to remain in high demand, with PE and institutional firms increasingly acquiring/expanding real estate portfolios to hold quality office assets. While disruptions in the tech sector might cause a slight dip in leasing activity, demand from other sectors would largely offset the decline.
Southern India (primarily Hyderabad and Bangalore) is expected to lead retail supply in 2018, with nearly 6 million sq. ft. of supply likely to be added across key seven cities. The year is likely to be the starting point for the evolution of Indian retail as new developments (such as sharing economy and flexible leases) improve its alignment with global trends.
The logistics sector is likely to go from strength to strength in 2018, on the back of sustained demand from several sectors and government initiatives such as grant of infrastructure status and GST. As existing players expand operations and new players enter the market, demand for warehousing space is anticipated to remain robust this year, with smaller cities accounting for most of the growth.
The residential sector is likely to undergo consolidation in 2018 as the after-effects of RERA and demonetization continue to be felt. The sieving process is expected to help credible players differentiate themselves as the focus moves towards end-users, ultimately leading to an improvement in buyer sentiment. Affordable housing is expected to be the key driver of the sector, and private participation in the segment is likely to pick up pace.
Improved transparency in the investment market (thanks to government initiatives) is expected to create a more secure environment for investors and provide them better exit opportunities. As a result, interest from offshore equity investors, large Indian corporates and HNIs in the market might increase in 2018. Average ticket size of investments would also increase, with office, warehousing and retail segments accounting for most of the investments.