Pre-leased commercial properties high on investor's radar

By : 360 Realtors

23 September, 2020

Investment in pre-leased commercial properties has gained traction in India in past few years. In the current scenario, investors are finding a decline in fixed income products like Term Deposits, Bonds, etc. In post-pandemic times both foreign and domestic investors, UHNIs and HNIs are actively investing in this asset type. Investing in pre-leased commercial properties would earn equity value along with capital appreciation earned on the escalated rent. Henceforth the investors can earn good returns; from pre-rented commercial properties.

What is a pre-leased property:

A pre-leased property denotes the one that is sanctioned to an organization and afterward sold to a customer including that lease. The buyer of a pre-rented property is guaranteed a settled ROI (Returns on Investments) from the first day, which is been composed as a rental income as the rent deed is transmitted to their name.

Benefits of Investing in Pre-leased Assets:

The biggest competitive advantage that investors get from pre-leased commercial assets is the rental yield, which is higher than that available through traditional investment options; the yield for centrally located commercial properties is approximately around 7%, while for the residential segment it is just around 2.5%. 

Another advantage is that investors start getting returns on their investments immediately and don’t have to be on a lookout for tenants. The key variables make pre-rented properties a feasible and attractive option for Investors. It is evident, seeing the market trends that the demand for commercial space is going to develop further at a fast pace, giving stable standard returns and capital appreciation in the long run. 

Pre-leased: Compelling Investment Asset Type

Almost zero waiting period for the ROI to start

A pre-leased investment offers quicker capital appreciation

It furnishes with unmovable rental income and great returns

 A stable debt-like return period during the entire holding period


Profile of Investors:

Investment against pre-leased commercial properties has become the most favorable option for property investors, entrepreneurs, and corporate houses.  Pre-leased properties got maximum benefits in locations like Gurugram, Noida, and peripheral area of Delhi. Most investors look at a deal in the ticket size of Rs 1 to 50 crore. 

Future Scope:

Pre-leased commercial properties have become lucrative for investors. Factors like regulation on REIT, entry of several foreign investors, and strict disclosure norms under RERA are some of the indicators.

Pre-leased properties got maximum benefits in locations like Gurugram, Noida, and peripheral area of Delhi. In these markets the capital value is higher as compared to other micro-markets, opportunities of buying a rented office/retail space give a great scope for.

 In terms of tenant profile, these markets see a diversified tenant mix from sectors IT/ITES, BFSI, Pharma, Manufacturing, E-Commerce, etc, this provides the owner portfolio balance and diversity. Also with positive macroeconomic factors along with positive regulatory initiatives, the demand from various sectors for the additional pre-rented property is bound to increase thereby having a positive impact in pre-leased CRE valuations.