Allianz Real Estate, the property arm of the German insurer, has committed US$150m to Indian office developments after teaming up with Indian conglomerate Godrej Group.
Allianz Real Estate has invested into a closed-end office development platform with developments across Mumbai and Gurgaon, according to a statement.
“We are confident that the platform will deliver upon completion a premium office product that is increasingly sought after by multinational tenants operating in India,” said Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate.
The new venture comes as office take-up increased 2% year-on-year and rents rose 3.1% across the top seven cities in India during H1 2019, according to Colliers.
That said, rental growth is projected to slow due to high levels of new supply scheduled to enter the market over the next five years.
The Godrej BTC platform, which plans to target premium Grade-A office developments in tier one cities, has secured two developments totalling 2m sq.ft. across Mumbai and Gurgaon, as well as a pipeline of 1.3m sq.ft. in Bengaluru.
Allianz, Godrej and a European pension manager will each own a third of the office development platform, with Godrej Fund Management overseeing investment management activities.
Allianz made its first real estate investment in India in 2017 when it established an office investment platform with Shapoorji Pallonji.
“We continue to believe in the long-term growth prospects of the Indian economy. Strong demographic trends and improving transparency are supporting real estate occupier as well as investor demand, in particular the office sector, which is ideal for long term institutional investors such as Allianz,” Desai said.
In the first half of 2019, the top seven cities in India recorded 24.4m sq.ft. of gross office absorption, driven by the technology sector and flexible workspace operators.
The overall office vacancy fell slightly to 10% in H1, however it is expected to rise to 15.1% by the end of the year due to expected high levels of new supply.
New office supply reached 23.2m sq.ft. across the top seven cities during the first half, with a further 44.7 sq.ft. of new supply expected to enter the market by the end of the year.
A wave of new office space is set to transform India’s major cities, with Colliers predicting an average of 61.3m sq.ft. of new office supply set to come online annually over the next five years.
This means total new office supply will grow 112% across India’s top cities between 2019 and 2023 compared to the preceding five years.
Allianz was advised by Allen & Gledhill, Khaitan & Co, Ernst & Young and AECOM.
Headquartered in Munich and Paris, Allianz Real Estate has €67.1bn in assets under management.