Commercial property

Commercial property to witness increased investment as offices open

There is hardly any dimension of our lives that the 2020 pandemic and technology as cause and effect (respectively) have not touched.

Google Maps and all home delivery services, for example, have changed the way we get around, order groceries, shop, etc. ‘virtually augment’ festival celebrations, global artist concerts, and even reshape the utility of commercial real estate. Just when you thought the physical space we move through was over, it’s not! These are surely interesting times to experience and see how technology and real estate will once again intertwine to create something new for the benefit of all.

That said, what does the “bricks and mortar” business situation look like? Does the introduction of the virtual world into our lives translate into a decline in physical commercial real estate? How have investors coped with the post-pandemic scenario as offices open and normality seems to have returned around us?

Surfing on investments and the fundamentals

Despite global whirlwinds unsettling oil prices, global interest rates, geopolitical strife and more, back home, Indian commercial real estate has been focused on improving market fundamentals. Even though the rise of hybrid/remote work models has momentarily impacted office occupancy, it is also seeing robust capital inflows due to new market penetrations (Rapidly developing Tier 1 and 2 cities) . In addition, establishing clear guidelines for the adoption of hybrid working systems, the integration of ESG fundamentals, the recalibration of “core+flex” workplace designs, etc. request.

It is therefore not surprising that the Indian real estate sector as a whole not only continues to demonstrate its resilience, but also to gain momentum towards rapid growth. Commercial remains the object of investor affection, given that overall office space absorption in 2022 is expected to reach 45-50 million square feet. Growth is estimated between 12% and 15%, higher than last year. Leasing also continues to be strong, growing >20% on an annual basis this year. Investment inflows into India’s real estate sector reached $5.5 billion, likely to increase by more than 5% and reach pre-pandemic levels in 2019.

An undeniable appointment with technology for higher yields

It appears that the uncertainty surrounding office and retail real estate as a stressed asset class has not only diminished, but rather been favored for higher yields. The current times are very lucrative for investors looking for bargains, with a promising annual rental yield of 10-12% on Class A office space, the stability of REIT investments, as well as the possibility of a capital appreciation in the future. Bengaluru’s Whitefield, Electronic City, Gurugram’s Sohna Road and MG Road, and Chennai’s OMR in these cases, for example, have emerged as favorable investment hotspots.

At the same time, I believe that the pervasive use of technology in real estate will continue to be a key factor for investors to consider. PropTech has become invaluable in everything from launching new projects, planning virtual tours, managing spaces with touchless features, using AI and the cloud to monitor tenant profiles. , filter applications, forecast rental yields, etc.

All aboard!

From hospitality and warehousing to retail real estate segments given funding, technology upgrades and political impulses during the pandemic, we can safely assume that private equity investment in Indian real estate is expected to reach nearly $7 billion in 2022. With a healthcare governance system introducing frequent policy updates to encourage investment and ease of doing business in the country as the offices open, the industry has the potential to reach $1 trillion by 2030.

(By Amit Kumar Aggarwal, Founder and CEO, NoBroker)