Construction Mirror Article detail

Mr Vipul Shah

Managing Director (Parinee Group)

The new year started on the note of a fresh variant of the virus making headlines. Though work-from-home has been kicked back into action, it is expected to be temporary. The commercial real estate space, which saw worse over the past year, has evolved stronger over the pandemic and is brimming with the hope of positive growth in 2022.  After a staggering response in the commercial real estate side last year, developers are now bullish as the segment is now gaining momentum with the net absorption of office spaces in India recording improvement. Some reports have positively forecast a net absorption of around 31-33 million sq ft for 2022, up by 20-25% year-on-year. 

Stable Scenario 

Learnings from the past two years indicate that compared to the volatility of 2021, which was caused by the second COVID-19 wave or even the jitters caused by the Omicron spread we are witness to right now, the Indian commercial real estate sector will be far more stable in 2022. Between 2020-21, we saw the demand for office spaces slow down as remote working became the norm. Digital workplaces led the transformation and commercial real estate revolving around physical offices took a beating.  A report on the segment by CBRE is reassuring as it predicts healthy growth in the commercial real estate space. The report reveals that office leasing activity reached 13.5 million sq. ft. in Q3 2021 growing at about 140 per cent over the previous quarter. The demand for flexible office space and hybrid models has witnessed a notable upward tick due to the pandemic. And this demand has been seen to move beyond the metros into the Tier II markets as well indicating increased overall stability to commercial real estate.   

Demand for Grade A office spaces has witnessed an increase. An aggressive push by way of government policies, business ecosystems developing, expansion plans being executed sans further delays etc. will see this demand for such office spaces continue through 2022 and beyond. The impetus for infrastructure by the government has led to the coming together of commercial real estate, coworking spaces, and Grade A offices. 

The requirements of the present times are such that co-working spaces and hybrid working cultures have emerged as new concepts in the area of commercial real estate and office spaces. Understanding that they will replace traditional working stereotypes and work-from-home models, has helped commercial real estate and developers of such projects to be better prepared, ready to survive newer challenges and yet offer increased stability.  

Baby Steps to Recovery 

The year 2022 will see more real estate players adopting new business models by making use of advanced technology and smarter offerings. The strict nationwide lockdowns across the country of 2020 are not expected to make a comeback as the world adapts to live around it. And hence, office spaces are not going away at all. They will take baby steps to make a full recovery. A recovery that is backed by a Phygital concept – where space is created so that the physical and digital worlds come together. This is a trend proving to be the new norm to be back in the office. The pandemic has put the sector to a test through which the office space has only emerged stronger.  Phygital office spaces are believed to provide a safe and collaborative working environment. As valuations have remained stable, investments towards the office space are bound to improve. Hence commercial real estate will continue to remain essential to innovation and organisational development. Beyond office spaces, the other aspects of commercial real estate – retail spaces, malls and hotels – too have shown improved business as families ventured out meeting friends and engaging with retail and dining at restaurants etc. In the travel sector, both the leisure and the business traveller also made comeback and this trend has only taken the brakes off stalled plans.  On the path to recovery, we can expect a progressive expansion on the back of consolidation in commercial real estate. Emerging trends suggest that the demand for office or dispersed commercial portfolios will follow a hub and spoke model and witness an expansion of satellite offices. Given its tremendous growth possibilities and the economic returns guaranteed, investing in commercial real estate is certain to be a preferred choice for many an investor in 2022. Both individual and institutional investors find commercial real estate as a tempting asset class. The steady increase in the private equity inflows into the commercial real estate market is there for everyone to see. Also, with recent listings of Indian REITs lending a thrust to the ability and desire of developers in creating more properties through increased liquidity inflows in commercial real estate, the segment is certainly set to be a far more stable asset class that will consolidate itself going forward.