The Indian economy showed some steady growth over the past few years. The government’s recent policy and reform initiatives have provided much-needed accountability and transparency to the Indian economy. Earlier the real estate sector was largely unregulated and developer-driven. However, the investor outlook has been quite positive both for international and domestic realty players despite the real estate industry witnessing huge reforms. They are preferring secure income streams and search for Grade A options. A recent survey said that the demand for Grade A office space is likely to grow as the absorption is expected to surpass 700 million sqft by 2022.
As the commercial leasing activity has been robust with Grade A spaces, it has been witnessing steady growth in rentals and valuations. Indian commercial real estate industry recorded robust growth with total space absorption of 12.6 million sqft in the consecutive quarter in Q2 2018 according to Colliers International. Bengaluru continued to maintain its pivotal position with about a 34% share of absorption in Q2, followed by the NCR at 28%, Mumbai at 14%, Hyderabad at 8%, Chennai at 8%, Pune at 6%, and Kolkata at 2%.
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The commercial real estate sector is witnessing some emerging trends that developers are adapting
1. Co-Working/Shared Spaces
In recent years, a large number of domestic and international companies have leased a significant number of space to construct and operate co-working centers in multiple cities. The growth of co-working space has been so fast that co-working operators are now looking to grow at a fast pace largely riding on pre-commitments from their existing clients. With a 7% share of leasing in H1 2018, co-workspace operators are making their presence felt in the real estate market. Besides its cost-effectiveness, quality, and flexibility, the use of flexible co-working space is becoming a more popular trend and making the deal overall sweater for the occupants. The momentum surely seems to be in favor of the coworking concept and we hope that in the coming few years it will continue expanding notably in cities like Mumbai, Bengaluru, and NCR.
2. ORCs (Office retail Complexes)
Another emerging trend in the commercial real estate space is the growth in the development of Office Retail Complexes. The growth in the development of ORC is a great example of the change in the mindset of realty developers. The retail industry is an important part of the economy and retail developments work as the epicenter for the leisure and shopping needs of the community. Owners of successful assets have managed to grow in certain cases because of their extensive efforts in attaining the right mix of occupants for their assets on the basis of their customer profile.
According to a report by Cushman and Wakefield, by 2020, top cities of India will absorb 40 to 45 million sq.ft. of office space per year. Government initiatives like the Smart Cities Mission and Housing for All by 2020 will give the real estate industry a much-need push.