EARLY LAST YEAR, the late legendary investor and vice chairman of Berkshire Hathaway, Charlie Munger, warned about trouble in the U.S. real estate market in an interview with Financial Times. "We have a lot of troubled office buildings, a lot of troubled shopping centres, a lot of troubled other properties. There's a lot of agony out there." Late last year, as he had prophesied, Moody's Analytics CRE Q4 2023 preliminary trend report said office vacancy in the U.S. had risen to a record 19.6%. "Despite increasingly optimistic consensus on likelihood of a macroeconomic soft landing along with positive news from the labour market, the permanence of dynamic hybrid models has muted office demand, making 2023 the most downbeat since the great financial crisis," says the report.

In contrast, India's office space has been showing robust growth after Covid with net absorption in top seven office markets touching nearly 42 million sq. ft. in 2023, the second-highest ever (peak was in 2019). Institutional investment into Indian real estate was around $5.8 billion. Over half went into office spaces. There has been huge traction in listing of real estate investment trusts (REITs) and deal action in the secondary market. The latest being global private equity giant Blackstone, a co-sponsor of India's first REIT by Embassy Group, offloading its remaining 23.59% stake for over $830 million, according to estimates. Even after the sale, foreign portfolio investors own 40% in Embassy's REIT portfolio, up from 26.85% in November 2023, showing foreign interest in India's office assets.

As companies ask employees to return to office and global companies expand India operations, foreign investors are likely to see India in a positive light in 2024 as well. It will be a continuation of the trend set in 2023. A report by real estate advisory Colliers India says institutional investments (by family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate funds-cum-developers, foreign-funded NBFCs and sovereign wealth funds) in real estate sector rose 10% to $5.4 billion in 2023. Of this, over $3 billion went into the office segment. Of this $3 billion, almost $2.7 billion came from foreign investors backing big deals. First half of 2023 saw deals such as Brookfield India Real Estate Investment Trust and GIC co-investing nearly $1.4 billion to acquire commercial real estate interest held by Brookfield's PE arm in Mumbai and Gurugram. Following the acquisition, Alok Aggarwal, CEO, BrookProp Management Services Private Ltd., said the acquisition had resulted in increase in share of BFSI and consulting tenants from 32% to 40% and reducing the share of top five tenants from 52% to 31%. "Achieving scale and de-risking portfolio through acquisition of high-quality assets has been our objective. We're happy to be executing our plans," he says.

Canadian Pension Plan (CPP) Investment Fund

Why India Office Realty Is Pepping Up Amidst Global Doom