Commercial property investment tips: 7 things to keep in mind 

Pune has emerged as a dynamic business hub in recent years, with the thriving IT, startups, manufacturing, and automobile industries have created a massive demand for commercial properties, and this trend is expected to continue in the coming years. As a result, commercial property investors from all over the world have set their sights on this bustling city of opportunities, recognizing the tremendous potential for both commercial and residential real estate investment. One of the key advantages of investing in Pune is its proximity to Mumbai, Pune offers an attractive alternative for businesses, investors, and first-time commercial property buyers seeking to establish a presence in major metropolitan Indian cities. 

The commercial property market in Pune is projected to grow at an impressive rate of around 15 percent, making it an attractive destination for investors looking to capitalize on the city’s economic boom.  

As per the report of Cushmanwakefield, the office real estate market in Pune has witnessed a significant surge in new supply in the fourth quarter of 2022, with approximately 1.3 million square feet (msf) of office space becoming operational, representing a three-fold increase quarter-on-quarter.  

The full year of 2022 saw a record high of 6.9 msf of new supply entering the market. This surge in new supply is a testament to the city’s robust economic growth, particularly in the PBD West (38%) and SBD East (32%) areas. 

Institutional developers have played a significant role in driving this growth, accounting for a majority (~55%) of the new supply entering the market in 2022. Looking ahead, there is a healthy pipeline of new supply in the works, with an estimated 17 msf of office space expected to be added to the market between 2023 and 2025.  

Now let’s examine seven important  tips to consider when investing in a commercial real estate property: 

1. Examine the area around the property 

Imagine you are a savvy investor on the lookout for the perfect commercial property to invest in. You have done your research and you know that location is everything when it comes to maximizing returns in the real estate market. With the current economic downturn affecting different areas in unique ways, you need to be sure you’re investing in a property that will not only provide a steady stream of rental income but also appreciate in value over time. 

That’s where functional connectivity comes into play. You need a property that is easily accessible so that you can attract tenants and customers alike. Imagine the convenience of having a retail store or office space located near a major transportation hub, making it easy for employees and customers to get to and from the property with ease.  

2. Annual rental appreciation rate  

As per the Market Beat report in Q4 2022, Pune’s residential sector noticed a significant rise of 68% on a Quarter on quarter (q-o-q) basis and 56% growth on an annual basis. Almost 15,328 launches were recorded last year. Pune is constantly recording a growth of 56% from 2021, for a quarter and a year. Whereas, in (Q2) of 2022, Pune recorded 3.6 msf industrial lease transactions- a rise of 60% on a Year on year ( y-o-y) basis and a steady growth of 80% compared to 2021. 

Commercial properties are an attractive investment option due to their potential for high rental appreciation. As per the recent report published by Outlook India, the retail sector is expected to experience a notable appreciation of 20%. Additionally, it is projected that the rental income derived from retail spaces will exceed the 15% mark. Moreover, the office real estate market is also poised for growth with an anticipated price appreciation of 18-20% in the year 2023. 

This presents a great opportunity for working-class Indians to invest in commercial properties through tools like Real Estate Investment Trusts (REITs). REITs are investment vehicles that allow individuals to pool their money and invest in a portfolio of income-generating real estate assets such as commercial buildings, hotels, malls, and warehouses. 

3. Market research 

The commercial real estate market in Pune, India has been experiencing significant growth in recent years, with annual lease volume reaching 6.70 million square feet (msf) in 2022, representing a growth of approximately 40% over the previous year. The gross leasing in the fourth quarter (Q4) of 2022 stood at 1.07 msf, indicating sustained demand for commercial office space in Pune. 

New demand for office space was the primary driver of leasing activity in Q4 2022, with fresh leasing contributing to a 72% share of the total leasing volume. Renewals of existing leases also contributed significantly to the leasing volume, accounting for an 18% share. This is why you need to analyze business properties right away. 

4. Accessibility  

When finalizing a commercial property, it is essential to briefly examine user-friendly services, such as parking facilities, lifts, and security measures. Although amenities like parking spaces may seem trivial, they can significantly impact the overall user experience. 

Furthermore, if the property is situated in close proximity to public transportation options, such as a bus stop or train station, this can offer convenient commuting alternatives for employees. However, if the property is situated in a remote location, a parking lot becomes an indispensable asset, not only for staff but also for clients visiting the premises. 

Consequently, it is recommended to thoroughly consider user-friendly services during the commercial property selection process, as it can have a significant on the demand and overall success of a business. If you are a first-time commercial property buyer and don’t want to compromise on the quality of the property then do check out this property!  

5. Consult the best builders in the market 

When it comes to selecting commercial properties, it’s important to note that premium Grade-A properties developed by reputable developers may come at a higher cost. However, they offer numerous benefits, including excellent build quality, ease of finding tenants, and efficient property maintenance. These factors can have a significant impact on the long-term profitability of your investment. 

Therefore, it’s crucial to seek out the advice of professionals and carefully evaluate all available options before making a final decision on purchasing commercial real estate. With careful consideration and expert guidance, you can successfully navigate the complex world of commercial real estate investment and reap the benefits of a profitable long-term investment. 

6. Financing options for purchasing an office or shop 

Evaluating the real estate investment market is essential for any investor or developer. Moreover, the property’s location and its history are crucial steps in determining the level of risk associated with the investment. Furthermore, make sure to conduct a thorough financial analysis, taking into account long-term plans, EMI affordability, down payments, savings, and potential debts. It’s important to avoid taking on excessive long-term debts that could jeopardize the investment’s profitability in the future. 

Before making any final decisions, it’s vital to conduct a comprehensive examination of all aspects of the purchasing process, ensuring that all necessary documents are complete and legally sound. This can help prevent any unexpected legal or financial issues that may arise in the future. By carefully evaluating all potential risks and taking necessary steps to mitigate them, investors can set themselves up for long-term success and profitability.

7. Flexibility and ROI 

Finding a property that can be modified and customized over the years to suit your business’s evolving needs is essential. This requires a careful evaluation of the property’s infrastructure, including electrical and plumbing systems, layout, and overall design. 

According to the latest Crushman & Wakefield report, the fresh lease volume in 2022 stood at a whopping 3.97 million square feet – a massive 36% increase from the previous year. Among the submarkets, Standard Bid Document (SBD) East led the pack with a 48% share in quarterly gross leasing, while Standard Bid Document (SBD) West followed closely behind with a 25% share. When it comes to the sectoral share, the IT-BPM and Manufacturing & Engineering sectors were the top performers, accounting for a combined 54% of quarterly gross leasing activity.  

In terms of the annual share, the flexible workspace and IT-BPM sectors were neck and neck, each holding 26% of the total GLV. So, if you’re considering investing in commercial real estate, these statistics provide a positive outlook for the future. With careful analysis and due diligence, you could find the perfect property to tap into this growing market and enjoy long-term success and profitability. Don’t miss out on this exciting opportunity – start exploring your options today! 

Conclusion  

If you’re a business owner looking for a commercial property, don’t settle for a one-size-fits-all solution.

You deserve a space that not only elevates your business but is also customized to your unique needs. By investing in a property that’s built just for you, you will be setting yourself up for long-term success and profitability. Your space can be tailored to meet your specific requirements, whether that is a large open floor plan, specialized equipment or machinery, or custom storage solutions. 

Of course, finding a property that’s custom-built for your business can take time and patience. But the rewards are immeasurable. At last, if you are looking for properties that can be customized as per your needs then make sure to check out under-construction properties today!

References: 

https://www.cushmanwakefield.com/en/india

https://www.marketbeat.com/

https://www.outlookindia.com/

https://www.cushmanwakefield.com/en/india/insights/india-office-market-report-q4-2022