Industrial and Logistics, Residential top the investment chart with 51% in 2021; touching new highs

Industrial and logistics investments highest in 5 years at USD1.1 bn · Residential investments highest in 4 years at USD0.9 bn Investments into alternate assets up 26% YoY

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Real estate institutional investment volumes closed at USD4billion in 2021. Although it is a 17% dip yoy, capital flows came on a broad-based recovery across most asset classes, geographies and doubled in the number of deals compared to 2020. Further, the dip is noticed as some large transactions had concluded in 2020. 2021 has been one of the best years for the industrial & logistics and residential sectors, accounting for about half of the total investments at about USD2 billion.

The Office sector attracted the highest investments at USD1.2 billion, accounting for 31% of the total investments in 2021. This reaffirms the resilience and the long-term growth story of the sector.

On the other hand, the industrial and logistics sector was the most sought-after and investments rose to a five-year high of USD1.1 billion. This was also more than a five-fold increase from 2020. The sector has been drawing strong operator and investor interest due to increased demand from e-commerce and 3PL players post pandemic. This growth momentum is likely to continue in 2022, as major global investors and developers continue to expand their footprint in proximity to high consumption areas across Tier I and II cities.

“The pandemic has accelerated a number of structural trends and will have lasting changes on the nature of real estate business in India. The Investments across asset classes have seen promising inflows in 2021 reflecting several opportunities for investors to recalibrate their strategy towards growth sectors. This is already evident in the rapid investment being allocated towards the residential, increasing development of data centers, alternatives, industrial, office as well as the evolution of the life science sector. There is a reflection of confidence in the industry to participate in the growth story and hence develop, build and own real assets in long term.” says, Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India.

“The year 2021 has seen a strong investor appetite for residential and industrial & logistics sectors while office continues to be dominant. The former breached record highs in recent times lapping up nearly USD2billion of the overall institutional investment volumes. This resonates the strong fundamentals and attractive valuations of the underlying assets supported by a positive economic outlook. The broad-based recovery signals signs of ebullience amongst investors and expansion of REITs, asset diversification, imminent potential in industrial & logistics will keep them busy in the Indian market. Moreover, niche asset classes such as Data centers, student housing and life science will provide a unique opportunity for investors to diversify their investments.” Says, Vimal Nadar, Senior Director and Head of Research, Colliers India.

Investments in the residential sector witnessed a two-fold rise in 2021; the luxury segment makes a comeback

Inflows in the residential segment witnessed a significant uptick with a two-fold increase YoY amid a recovery in the residential sector and increased demand for capital. Private Equity funds are looking at providing capital for fresh investments in residential projects, and also for refinancing/restructuring existing loans of banks and NBFCs. The luxury segment accounted for about 35% of the total investments, with the rest in mid-income and affordable category projects. Luxury residential projects witnessed increased investments in 2021 as demand for bigger homes and gated communities has significantly increased during the past one year.

Share of city-focused deals double, led by Mumbai, Delhi-NCR and Bengaluru

As compared to last year, the share of single city deals witnessed a two-fold increase during 2021, indicating investors’ rising preference towards specific high-quality assets in key locations. With increased investments in select luxury residential projects and data centres, Mumbai led the investment pie in 2021 with a 20% share. Foreign private equity investors continued to have the majority share in the investment volumes, but domestic funds have shown higher confidence, compared to last year, led by a steady recovery in the economy.

Student housing and life science sector see increased traction

Investments in the alternatives continued the growth momentum during 2021, led by data centres. Alternate assets (student housing, co-living, life sciences, data centers) accounted for 11% of the total investments in 2021, from 8% in 2020. Data centres garnered the highest share of about 60% in total investments in alternate assets in 2021. We expect investments in data centers to further accelerate in the next 2-3 years, a major data centre and digital infrastructure companies are creating platforms and JVs to expand their presence in India.

Along with data centers, investors’ appetite towards student housing and life sciences sectors increased during 2021, with major private equity investors such as Warburg Pincus and Cerestra making investments in the sectors. In 2021, Canada based Ivanhoe Cambridge committed investments worth USD100 million to develop a 1 million square ft of life science and R&D office labs in Genome Valley, Hyderabad.