Commercial Real Estate in India Opportunities, Challenges and Future Prospects (2024–2029)
The commercial real estate market in India is expected to grow at a CAGR of 21.10% from 2024 to 2029, driven by increasing demand for office spaces, retail outlets, and industrial facilities. The market is segmented into different types such as offices, retail, industrial and logistics, and hospitality. The office segment is the largest, accounting for around 60% of the total market share
Commercial Real Estate Market Segmentation in India
The commercial real estate market in India is segmented by type and geography. The types of commercial properties include offices, retail, industrial and logistics, and hospitality. The geography is segmented into different regions such as Asia-Pacific, North America, Europe, Middle-East and Africa, and Latin America.
Types of Commercial Properties
- Offices: Commercial property that can be purchased or rented out to business people for the purpose of setting up offices to run their business.
- Retail spaces: Retail spaces are nothing but shops that cater to customers directly. By selling or renting retail spaces, income is guaranteed.
- Wholesale spaces: Wholesale spaces are also B2B (Business to Business) shops. These are usually more spacious than retail spaces as they sell to retail owners directly and also deal with goods in bulk.
- Industrial spaces: These are commercial spaces that are used by different industries to set up warehouses, manufacturing units, and more.
- Logistics spaces: These spaces are like industrial warehouses that act as assembling and distribution hubs for industrial businesses.
- Hospitality spaces: Hospitality real estate includes those properties that serve the hospitality industry and the service industry at large. These include lodging, restaurants, theme parks, entertainment hubs, etc.
Geography
- Asia-Pacific: This region includes countries such as India, China, Japan, and South Korea.
- North America: This region includes countries such as the United States, Canada, and Mexico.
- Europe: This region includes countries such as the United Kingdom, Germany, France, and Italy.
- Middle-East and Africa: This region includes countries such as the United Arab Emirates, Saudi Arabia, Egypt, and South Africa.
- Latin America: This region includes countries such as Brazil, Mexico, and Argentina.
Key Cities
- Mumbai: Known for its financial and commercial hub, Mumbai is the largest commercial real estate market in India.
- Bangalore: Bangalore is a major IT hub and has seen significant growth in the commercial real estate market.
- Delhi: Delhi is the capital of India and has a significant commercial real estate market.
- Hyderabad: Hyderabad is another major IT hub and has seen significant growth in the commercial real estate market.
- Chennai: Chennai is a major commercial center and has a significant commercial real estate market.
Commercial Real Estate Market Trends in India by Region
The commercial real estate market in India is segmented by region, with different regions having distinct trends and growth prospects. Here are the key regions and their trends:
Asia-Pacific
- India: The commercial real estate market in India is expected to grow at a CAGR of 21.10% from 2024 to 2029, driven by increasing demand for office spaces, retail outlets, and industrial facilities.
North America
- United States: The commercial real estate market in the United States is expected to grow at a CAGR of 4.5% from 2024 to 2029, driven by increasing demand for office spaces and retail outlets.
Europe
- United Kingdom: The commercial real estate market in the United Kingdom is expected to grow at a CAGR of 3.5% from 2024 to 2029, driven by increasing demand for office spaces and retail outlets.
Middle-East and Africa
- United Arab Emirates: The commercial real estate market in the United Arab Emirates is expected to grow at a CAGR of 5.5% from 2024 to 2029, driven by increasing demand for office spaces and retail outlets.
Latin America
- Brazil: The commercial real estate market in Brazil is expected to grow at a CAGR of 6.5% from 2024 to 2029, driven by increasing demand for office spaces and retail outlets
Top Commercial Real Estate Markets in India
India has several top commercial real estate markets that offer attractive investment opportunities. Here are some of the key cities
Mumbai
Mumbai, the financial capital of India, is a diverse market with varying options for occupiers and investors. Entry rentals range from around ₹60/sq ft/month in suburban areas to over ₹300/sq ft/month in prime locations like Bandra Kurla Complex (BKC).BKC is a core saturated market with higher entry rentals, capital values, and very low vacancy levels (sub 4%). The presence of a large ecosystem and good quality buildings makes it a desired address for many occupiers.Lower Parel has traditionally attracted demand from occupiers moving out of Fort/Nariman Point areas and has some quality office spaces. While vacancies increased to around 17% due to large completions in 2022, there is limited new supply hitting the market.
Bangalore
Bangalore, the major IT hub of India, has seen significant growth in the commercial real estate market. Key markets include the Central Business District (CBD) and Outer Ring Road (ORR).Whitefield, the second largest market in Bangalore, received fresh impetus in 2023 with metro connectivity to the CBD. Average rents of sub ₹60/sq ft per month have ensured Whitefield enjoys both fresh occupier interest and consumption of office space.However, certain pockets of Bangalore have high vacancy levels, with SBD North at around 37% and Peripheral East at around 70%. Investors should focus on pre-leased office opportunities in ORR/Whitefield markets where institutional supply is limited.
Delhi NCR
The National Capital Region of Delhi is rapidly developing, with areas like Noida and Greater Noida seeing rapid infrastructure development. Commercial properties in Delhi NCR are expected to provide the best returns on investment, especially with the urbanization and development of the Rapid Rail Transit System (RRTS) connecting NCR with nearby regions.
Pune
For commercial real estate investors considering Pune, the SBD East and SBD West markets are attractive due to low vacancies and strong demand from IT and managed office firms.
Thane and Navi Mumbai
Thane and Navi Mumbai account for around 27% of Mumbai’s commercial real estate stock and are predominantly back-office markets for cost-conscious occupiers. These markets have seen higher vacancies, keeping capital values in check
Conclusion
The commercial real estate market in India is expected to experience significant growth in the coming years, driven by increasing demand for office spaces, retail outlets, and industrial facilities. The market is segmented into different types such as offices, retail, industrial and logistics, and hospitality, with the office segment being the largest, accounting for around 60% of the total market share