Mumbai industrial demand was strong in Q3
While the global investor sentiment remains strong towards Indian real estate, the market continues to pose challenges in generating favorable returns relative to the cost of capital, according to Colliers’ (NASDAQ, TSX: CIGI) Q3 2023 APAC Cap Rates Report
In Bengaluru, Q3 office transaction volumes remained similar to the previous quarter, with a few transactions driven by individual investors as institutional players were less active. Deal sizes were smaller but more resilient, resulting in a marginal downward change in the cap rate in the office segment, said the report, reflecting that markets across the Asia Pacific region face interest rate pressures.
In Mumbai, the retail sector is anticipated to gain traction in the near future, driven by demand from the luxury segment and the release of additional supplies of quality organized retail assets.
Mumbai industrial demand remained strong in Q3, and the compression in the cap rate was attributed to lower availability of Grade A stock, coupled with a positive outlook from large institutional investors towards the sector. The investors were willing to trade off lower current yields for anticipated future growth in the sector.
“Given that the RBI has not changed the rate stance over the last 8 months with inflation range bound, the trend of fully leased CRE as investment for inflation hedge has cooled, expanding investor interest into under-development and alternative assets,” says Ajay Sharma, Managing Director, Valuation Services.
“Further, yield compression has slowed considerably indicating peaking in ROI cycle where optimum valuations have been reached. Industrial assets continue to see encouraging investments despite yield compression slowing significantly and will be range bound till macro-economic factors step in to make any change,” he said on 8 Nov 2023. Fiinews.com
