Private Equity Investment in Real Estate Surges 98% QoQ in Q1 2022: Report
The real estate sector in India received $1,180 million in the first quarter of 2022, registering a 98% quarter-on-quarter (QQ) growth compared to the fourth quarter of 2021, which received private equity investments of $597 million . In calendar year 2021, total private equity investment (equity + debt) was recorded at $6,199 million, recording a 57% year-over-year increase from 2020, according to Knight Frank India.
Since 2011, the real estate sector has received cumulative private equity investments of more than $50 billion ($50,809 million). Offices remained the preferred asset class, attracting $2,882 million in calendar year 2021, while in the first quarter of 2022 the sector attracted $732 million. The real estate sector is expected to receive private equity investments of around $6.8 billion ($6,884 million) in calendar year 2022.
The office sector received 62% of private equity investment in Q1 2022, followed by retail (21%), warehousing (10%) and residential (6%). From the perspective of annual numbers, calendar year 2021 saw a 57% increase to $6,199 million from the $3,945 million received in CY 2020. Office constituted 46% of private equity investments in 2021, followed by warehousing (21%), residential (19%) and retail (13%). The number of transactions increased from 20 in 2020 to 52 in 2021.
The way forward: Outlook 2022
Knight Frank India estimates that capital markets will show 11% year-on-year growth to $6,884 million in the year 2022.
Commenting on the same, Shishir Baijal, Chairman and Managing Director of Knight Frank India, said, “While investor appetite has remained strong across various real estate asset classes in 2021, escalating global tensions emanating from the Russian-Ukrainian war and omicron’s influence in the beginning of the year dampened investment. Going forward, the surge in infrastructure spending will accelerate investment over the next 3 quarters of 2022 to levels seen before the pandemic, with estimated investment reaching $6.8 billion.
Trends in private equity investments in office assets: the most favored segment
In 2021, the office real estate segment received investments worth $2,882 million from 14 deals, with total tradable area recorded at 35.4 million square feet. Around 68% of investments were in new development projects and assets under construction, compared to 86% in ready assets. observed in 2016. The main reason for this increase is the lack of mature and tradable assets in the Indian office market. Bengaluru and Hyderabad led the investment scenario due to development-stage deals by major global funds.
In the first quarter of 2022, the total area of office assets traded was 36.9 million square feet, largely thanks to a large agreement between Mindspace REIT and the Middle East sovereign wealth fund Abu Dhabi Investment Authority (ADIA ). The increase in the surface treated suggests an improvement in the appetite of investors for larger spaces. Office assets recorded a transaction value of $732 million in the first quarter of 2022 from 3 transactions.
The sector received investments worth $817 million in 2021, up 271% year-on-year despite the COVID threat. Private equity investment in retail has remained focused with two major deals in 2021: an investment by Blackstone in Prestige’s retail assets and an investment by GIC and the Regime Investment Board. pensions of Canada in Phoenix Mills.
The retail segment received investments worth $253 million in the first quarter of 2022, led by a single transaction. The total area of commercial assets traded in the first quarter of 2022 was 1.7 million square feet. Lake Shore India Council, backed by the Abu Dhabi Investment Authority, has purchased Viviana Mall in Thane from Singapore’s Sovereign Wealth Fund GIC and property developer Ashwin Sheth Group.
The retail sector is expected to see capital commitments from investment platforms that remain optimistic about its growth prospects, eyeing the buoyancy in retail sales resulting from the prolonged pandemic stress.