Before the pandemic hit the country, the office sector in India was witnessing a rapid transformation and growth owing to the urbanization of Indian cities and the introduction of policies that sponsored the advancement of commercial real estate in the country. During the pandemic, the commercial real estate sector suffered a major blow but post the pandemic it picked acceleration on its recovery.
According to Colliers, office space leasing in the country may reach its all-time high growth in 2022. Office space leasing in India hiked by 97% in January-September in 6 Indian cities i.e., Hyderabad, Delhi-NCR, Bengaluru, Mumbai, Chennai, and Pune. Two major industries contributing to the rising demand for office space in the country are technology and co-working firms.
Let’s read some of the current trends in India’s commercial real estate sector to understand its performance in the current fiscal year:
- The demand for office space in the country has been on the rise and is substantially still rising. Many firms in sectors like IT, Financial, Banking, Business Processing Management (BPM), and Insurance Services (BFIS) are searching for more office spaces and are contributing to the rising demand for office space in the country.
- The gross absorption of office spaces enjoyed all-time high figures in the first quarter of this year. The office space’s gross absorption currently stands at 13 million square feet.
- The Indian Office Sector is one of the major sectors that is noted to have recovered the fastest from the aftermath of the pandemic. Studies suggest that in the top seven metropolitan cities the Grade A office market will grow over 1 billion square feet in size by the year 2026.
- Reports point out that urban cities like Chennai, Bengaluru, and Delhi NCR contributed to the major absorption of office space in the first quarter of 2022. In this quarter the leasing activity witnessed a cumulative growth of 97% year-on-year.
Let’s look at the sectors that contributed to the major momentum in the office leasing activity in the first quarter of this year:
- Technology firms – 34%
- BFSI Corporations – 17%
- Flexible space operators – 13%
- Engineering & Manufacturing firms – 12%
- Research, consulting, & analyst firms – 11%
With the commercial real estate market experiencing sustainable growth this year, it’s safe to say that the sector is back on track in terms of growth. Now that the sector is showing an upward growth trend, let’s look at the trends we can expect from this sector in the coming years-
- Flexible office spaces are the new normal – Since the pandemic, the demand for co-working, flexible office spaces has been on the rise in the country. This is owing to the fact that most industries are looking at flexible office spaces as a safe and convenient alternative to traditional office spaces. According to CBRE, the country’s flexible office space is going to witness a whopping expansion of 10-15% year-on-year, in the next three years.
- Sustainability is going to get a new highlight – Builders and developers in the commercial real estate sector are planning to go green with their assets. Presently the entire world is undergoing a mass green movement and hence adopting sustainability is a viable way forward strategy for this sector.
- Governing bodies in the country like LEED, IGBC, GRIHA, and BEE inspect the buildings and certify them as ‘green buildings.’ Developers and builders are now placing emphasis on these certifications and are aiming to achieve them for their office space buildings to lure environmentally conscious clients.
- The newest and popular addition to commercial real estate is shop-cum-office spaces – The new-age business owners and investors are looking for innovative office spaces which they can utilize for different purposes. As firms are contemplating diversifying their portfolios, the shop-cum-office spaces are garnering popular attention among them.
The Haryana government has already given a go-ahead to the concept of shop-cum-office (SCO) spaces. The fever of SCOs is expected to be caught up by the rest of the metropolitan cities in the country soon.
These are some of the trends in the commercial real estate market that one can look forward to. As mentioned earlier the growth of this sector is gaining momentum, especially with more and more companies now looking forward to reopening their offices. In addition to this, post-pandemic hybrid working models and co-working spaces, which are an innate part of the flex market, are receiving new attention and popularity in the market. If the reports are to be believed, the flex market is expected to double its size across the top 5 cities and reach 75 million square feet by 2025 and 100 million square feet by 2030.
The commercial real estate is on the road to recovery and we can expect office leasing activity to pick up pace in a matter of time.