With 8.8% Cap Rate For Commercial Assets, India Remains Favourable Market Investment Destination: Knight Frank Report

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    Mumbai, 26th July 2019 – Knight Frank, the independent global property consultancy, has come up with commercial research on Asia Pacific Capital Markets. With ongoing trade tensions and heightened economic uncertainties, many Asia-Pacific central banks have opted for a more dovish stance on their monetary policies. In the past six months alone, five Asia-Pacific central banks have cut their benchmark interest rates following weaker than expected economic readings.

    The Reserve Bank of India (RBI) has cut its benchmark interest rate by 75 bps in 2019. With the latest cut of 25 bps in June 2019, the RBI reduced the benchmark rates to 5.75%, citing the slowdown with its economy and inflation being in the lower end RBI’s target range. India’s GDP growth fell sharply to 6.6% in Q4 2018, surprising the market following the 7.1% and 8.2% GDP growth recorded in the previous two quarters.

    Asia Pacific Cap Rate Summary Table (as of Q1 2019)

    Country Sector Cap Rate 12 Month Outlook Current Yield Spread 10Y Average Spread
     

    China Tier 1

    Office 4.4% Unfavourable 1.3% 2.3%
    Retail 4.7% Unfavourable 1.6% 2.4%
    Industrial 5.5% Stable 2.4% 2.5%
    Seoul Office 4.8% Stable 2.9% 2.1%
     

    Hong Kong

    Office 2.3% Stable 0.8% 1.1%
    Retail 2.6% Stable 1.1% 1.0%
    Industrial 2.6% Stable 1.1% 1.2%
     

    Tokyo

    Office 3.9% Favourable 3.2% 2.9%
    Retail 4.1% Stable 3.4% 2.9%
    Industrial 4.6% Stable 3.4% 3.6%
    Philippines Office 5.9% Favourable 0.3% 2.3%
    Retail 7.1% Stable 1.5% 2.1%
    Thailand Office 7.0% Stable 4.5% 3.7%
     

    Malaysia

    Office 6.5% Unfavourable 2.7% 2.4%
    Retail 6.5% Stable 2.7% 2.3%
    Industrial 6.8% Favourable 3.0% 3.4%
    Indonesia Office 6.5% Unfavourable 1.2% 0.2%
    Retail 8.0% Stable 0.3% 1.9%
     

    Singapore

     

    Office 4.1% Stable 2.0% 1.5%
    Retail 4.7% Stable 2.6% 3.0%
    Industrial 6.2% Unfavourable 4.1% 4.3%
    Sydney Office 4.6% Stable 2.8% 2.4%
    Industrial 5.8% Favourable 4.0% 4.0%
    Melbourne Office 4.7% Stable 2.9% 2.7%
    Industrial 6.2% Favourable 4.4% 4.1%
    Perth Office 6.8% Favourable 5.0% 4.1%
    Industrial 7.0% Favourable 5.2% 4.3%
    India Office 8.8% Favourable 1.5% 2.2%

                Source: Knight Frank Research

    “India’s office market offers some of the best returns for investors with over 8% yield, based on the fact that the underlined  demand – supply dynamics are favourable for investors. This is demonstrated by the fact that 4 out of 8 office markets have single digit vacancy levels underscoring the strength of this segment. H1 2019 recorded the highest ever, 6 months, office transactions of over 27 million square feet.” said Sharad Agrawal, Executive Director- Capital Markets, Knight Frank India.

     

    INDIA OFFICE MARKET SNAPSHOT

    City New Completions (in mn sq ft) Transactions (in mn sq ft)
    H1 2018 H1 2019 % change (yoy) H1 2018 H1 2019 % change (yoy)
    Mumbai 4.4 1.9 -56% 2.9 4.6 61%
    NCR 3.6 5.9 64% 3.4 3.8 11%
    Bengaluru 3.7 7.6 107% 6.5 8.3 27%
    Pune 2.7 1.5 -44% 3.9 3.8 -1%
    Ahmedabad 0.9 2.6 192% 0.5

     

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