Pre-leased Commercial Real Estate (CRE) has been increasingly becoming one of the attractive investment opportunities in India over the past few years. Post the demonetization, investors found that the returns on the fixed income products like the bonds, fixed deposits, etc. have seen a rapid decline in investment interest. Thus, leaving pre-leased CRE has a lucrative investment opportunity for getting stabilized returns with appreciation on exit. Today, both foreign and domestic investors, UHNIs and HNIs are actively investing in this asset type.

When venturing into a pre-leased CRE the risks involved are low to medium. As the investments start creating returns from the very beginning, the business owners enjoy a stable debt-like return period during the entire holding period. These profits can go from 8.5%-9.5% p.a. in the first place and steadily enhance due to the lease accelerations, which is ordinarily 5% on a year or 15% in the following 3 years. These are balanced out returns because of rent period is ordinarily around 3-15 years.

In bigger cities like Gurgaon where the capital value is higher as compared to other micro markets, opportunities for buying a rented office space give a great scope for investments for creating a nifty business portfolio.  In terms of tenant profile, Gurgaon sees a diversified tenant mix from sectors IT/ITES, BFSI, Pharma, Manufacturing, e-Commerce etc. which provide the owner portfolio balance and diversity. Also with positive macroeconomic factors along with positive regulatory initiatives, the demand from various sectors for additional pre-rented property in Gurgaon is bound to increase thereby having a positive impact in pre-leased CRE valuations.

The key variables make pre-rented properties a compelling investment option. It is evident, seeing the market trends that the demand for office space is going to develop further at a hearty pace, giving stable standard returns and capital appreciation in the long run. Higher transparency would further boost the commercial space demand and therefore make pre-leases a compelling investment choice.