Godrej Fund Management (GFM), the real estate private equity arm of the Godrej Group, is looking to raise another $400-$500 million funds through a new office fund early next year. Karan Bolaria, managing director & CEO, Godrej Fund Management told FE, “Our AUM (assets under management) in our office platform has exceeded $1 billion. We plan to raise $400-500 million incrementally. We are a well capitalised group, so we are going to be doing a combination of our own capital and raising more funds and deploying that money into Grade A office buildings in the four cities that we operate in”.
Remaining bullish on the office space demand outside of IT and ITeS industry, Bolaria said that with the pandemic, occupiers are interested in taking 20-25% more office space, to be able to maintain social distancing norms in the offices. This will lead to more office space take-up.
Forecasting a steady Grade A office space demand the plans on building office space portfolio are also afoot. “We roughly have 4 million square feet of development under office space. Of that a little over million square feet is going to become operational by December. The remaining 3 million square feet will become operational in the next 24-36 months,” Bolaria said.
Despite the uncertainty surrounding the future of office real estate as companies suggest making work-from-home a permanent feature, most big developers are positive that the office demand will only grow. FE had reported on August 12, that Tata Realty is not buying into work-from-home culture and is planning for a massive office space portfolio – building 45 million square feet of office space over the next 7-10 years. Bengaluru-based real estate developer Embassy Group has also been vocal on different platforms that the offtake of Grade A office space will only go up in the coming years with occupiers looking at de-densification of offices.
To be sure, private equity investments into office space have also remained healthy, so far in the year. According to Colliers International the commercial office segment in India continues to attract significant interest from investors even in the current times of uncertainty around the remote working culture that is likely to continue till the end of 2020. The segment attracted investment inflows of Rs 15 billion ($207 million) during 2020 through August, accounting for a 24% share in the total investment pie.
Piyush Gupta, managing director (capital markets & investment services), Colliers International India said, “Commercial office to continue drive investor demand for quality Grade-A assets and with successful REITs established depth across Institutional and retail investors. There is likely to be an enhanced demand for operating assets, which may extend to warehousing/industrial, consumption and technology driven assets demand, such as data centres”.
Meanwhile, the impact of pandemic has been felt on the land prices for commercial real estate. According to Bolaria, there is a 10-20% correction in land prices compared to pre-Covid levels. GFM manages over $1 billion of capital across four funds in residential and office space. The two office funds include Godrej Build to Core-I (GBTC-I), a $450 million ‘club style’ office investment platform that is invested in developing Grade-A office buildings across the key office markets of India. APG Asset Management, which has invested in previous funds managed by GFM, is the cornerstone investor for GBTC-I.
The other fund is Godrej Office Fund- I (GOF-I), a $150 million discretionary blind pool fund that is invested in core and core-plus office and commercial properties across India.