The real estate industry is in the cusp of a transformation and the past decade has played a crucial role in shaping the sector. The realty sector and its ancillary industries witnessed a series of structural reforms with advent of RERA, introduction of GST, industry consolidation, fast proptech growth, and so on, which has helped increase transparency and trust between builders and buyers.
Following the pandemic, here are the few trends of the commercial real estate sector that will help you invest better in 2020-21:
The office spaces sector had witnessed a robust growth over the last four years with an average annual net absorption crossing 30 mn sq ft. That resulted in steady rentals and capital appreciation, until the onset of the pandemic.
While most of the companies declared WFH amidst pandemic, the demand for the office spaces has been affected. And as the pandemic continues, industry leaders are trying to battle the challenges of working for home such as teamwork, performance management, productivity, creativity, data privacy, apartment sizes, office infrastructure and connectivity.
The future lies in the evolution of office spaces - open office environment and density of space per employee - that would help us embrace the new normal and be one of the first few sectors to bounce back. Also those with a long-term outlook may use this period to bargain deals at attractive valuations.
- Tech MNCs like Google, Intel, Amazon, Microsoft and Accenture have either leased space or are in talks with local developers to occupy over 6 mn sq ft of office space in Bengaluru to consolidate or accommodate their expansion plans.
- Office space has emerged as the most preferred segment by High Net worth Individuals (HNIs) in India, accounting for 67% of their total investments in real estate
- Experts expect attractive investment opportunities to emerge in the strata office space by end of 2020, which is estimated to be 180 mn sq ft valued at Rs 2.26 lakh crore
The retail space has been going through massive changes since the rise of ecommerce.
Due to the pandemic, ecommerce has achieved greater heights and even the section of the target group who weren’t accustomed to digital shopping like senior citizens have joined the existing net savvy consumers, for basic essentials like grocery, creating further challenges for the brick and mortar shops to bounce back. Post covid, demand for retail space would still lay low unless they undergo massive changes. Given all the challenges collectively, the market predicts that shopping center & mall owners will need to show investors how they expect to drive revenue in the new normal.
- Retail RE will further remain under-pressure as 20-25 percent of the retail shopping experience is shifting online.
- Global spendings on AI inside retail stores are expected to reach 97.9 billion dollars and this might affect the way retail spaces are created and sold.
The industrial and warehousing sector in India had attracted significant investor interest since 2017 led by robust demand from e-commerce and other consumer-led occupiers.
Due to the pandemic the grocery and basic essentials ecommerce companies helped demand for warehouses spike further to meet the needs of consumers and create a buffer of goods.
Experts project investment inflows likely to touch Rs 495 billion (USD 7 billion) by 2021 as existing participants expand their portfolio and new players enter the market during the covid crisis. So it’s safe to assume that even in the post pandemic era as well, the industrial and logistics sector will continue to present good investment opportunities.
- By 2025, huge e-commerce sales would create demand of nearly 1 billion square feet from e-commerce users
- Occupiers mulling large warehouse leases, especially in the e-commerce and 3PL (third-party logistics) sectors, looking at selecting micro markets that offer a good mix of industrial and multi-purpose warehouses
As a global community, we’re still working to understand this new normal. We do know, however, that investors must think beyond the traditional use of a property and envision how space might be repurposed in the future. This will take not only a hyperlocal understanding of markets, but also a deep knowledge of macro trends. While no asset class will be unmarked by this crisis, it is clear that the future belongs to those who make plans today.
(re)Imagine real estate Investments report by JLL