The comeback certainly looks to be stronger than the set back. The overall confidence is strong and Real Estate (RE) remains attractive to investors.The industry is gradually emerging stronger, smarter and more powerful and taking a positive shape. Adoption of digital technologies, higher stress on safety, hygiene, and amenities to support the new norm of social distancing are paving way for Innovation, Recalibration, Restructuring and Reshaping of the Industry.
There are a number of factors viz. fast-paced vaccination program, employees coming back to offices, digitalization, increased job opportunities and demand across commercial space that have together brought economic activities on track, with the result that we are poised for a major transformation in the Commercial Real Estate Space.
New norms in Commercial RE such as Hub & Spoke Model (Flex spaces), Shared Spaces, Co-working spaces, Reverse Migration to Tier-2 & Tier-3 cities, have stagnated the progresses within the industry, which was already on slow down mode due to Covid-19.
Post Covid-19, current developments have become location and industry specific -
- IT/ITs have become prime drivers for leasing activities in top cities followed by technology, BFSI, consulting, and manufacturing occupiers etc.
- In Q3 2021, IT/ITs observed 34% transaction while manufacturing accounted for 3.7 mn sq ft or 29% of the total area transacted. This can be attributed largely to a 1.5 mn sq ft transaction by a wireless technology hardware manufacturers.
- Tier-2 & Tier-3 cities getting momentum due to employee centric policies resulting in developing flex/hybrid models @ regional levels.
- Private equity inflows in Commercial RE have been increasing.
- Listing of REITs has brought increased liquidity inflows to the Commercial RE.
- As 7,400 office leases of 90 million sq ft, are up for renewal in the top 6 cities in 2021, and seeing the industry’s bulk hiring spree certainly gives positive momentum to the current fiscal and 2022 & 2023.
- Net office absorption stood at 4.39 million sq ft in Q2, showing 32% YoY growth in major cities, while new completions have grown by 6% compared to corresponding period of the previous year.
- Q3 2021 has been the strongest quarter of the year, with 12.5 million sq ft of office space transacted, a 168% growth in YoY terms.
- By the end of 2021, the market is expected to witness a growth of 20-30% due to activities happening in the second half.
- Revival in retail spaces, reopening of malls and specially F&B’s coming back, and increased spending of customer has put retailers on the recovery mode.
Looking at industry developments, new norms and factors influencing development in Commercial RE, business development activities will be on the recovery mode till Q3 2021, and will reach pre-Covid level post Q4 2021.