Sunny days for Indian commercial realty in the New Year.
The Indian real estate has witnessed some promising changes in the previous year. Even though the residential real estate hit shaky grounds in the past year, commercial realty saw some steady growth. The real estate industry boomed by rapid technological advancements and significant policy implementations is set to experience an increase in fresh demand for office space to the tune of 34.2 million square feet 1 . Even as the strong policy moves falling into place in the Trump-headed US economy are likely to distort businesses across sectors, it is quite premature to predict how these changes will influence the commercial realty scene in India.
There has been some major developments in the macroeconomic and regulatory framework of the country along with rapidly transforming lifestyle patterns. With more and more e-commerce startups mushrooming, there is a predictable increase in demand for workspace with a futuristic growth in mind. Even though some factors such as depreciation of INR with respect to Euro and USD, switch over to process driven jobs with higher use of technology, have slowed down the rate of outsourcing in the markets, there has still been a steady rise in demand for office space.
While experts are predicting a growth in demand from fast expanding sectors like manufacturing, logistics, IT, and FMCG, there is a likely shift in pattern towards the commercial leasing segment. Big real estate firms are cashing in on increasing lease rental trends with major businesses who have shown strong preference for buying their own commercial space in the past are now turning towards leasing out office space to satisfy dynamic requirements. New global firms are looking to fast expand their footprints across India under a favorable FDI regime. It is definitely a promising scenario for the commercial office space segment, with a predictable surge in demand.
Another reason that has majorly impacted the commercial real estate segment in India in the past is lack of availability of quality workspace. Finding the ideal location and the right space has been challenging for businesses in the country. However, with huge commercial space being added in the new year, this problem stands likely to be sorted in the near future. Many big players in the industry are pouring in funds to improve and develop infrastructure in Tier-I as well as Tier-II cities like Hyderabad, Pune, Chennai, and Indore, which is expected to bring in and accommodate greater demand for office space in 2017. Tier-II cities are bustling with opportunity as more quality spaces are being made available at competitive lease values while also offering wider market visibility. The commercial realty ecosystem of urban centers like Delhi-NCR and Mumbai has hit rough roads due to saturation of high-quality options and a higher vacancy of inferior locations.
As a consequence, the demand for commercial space is evolving with a collaborative work culture finding niche and big corporates shifting focus to innovative workspaces. A number of firms are also transforming their outlook towards workspace to a more sustainable and eco-friendly approach.
Besides, the implementation of the Real Estate Regulatory Act, the Benami Transactions Act, and GST has opened up the otherwise dark alleys of the realty market and made the whole picture more transparent. This has not only raised the bar for commercial real estate players to provide for the contemporary demands but has also driven investors to fund premium assets that fulfill these needs. Therefore, it can be said that any existing lull in the segment is only temporary and will soon reveal a more credible, stable and superior range of opportunities. The year 2017 holds a bright future for the commercial real estate market, driven by excellent connectivity, vast improvements in infrastructure, growth in supply of campus-styled workstations, and competitive capital values.
1 Source: Livemint