The commercial real estate sector has been one of the major growth catalysts in India’s development story. It contributed to the development of office infrastructure, IT hubs, and knowledge parks. It also led to the rise of employment opportunities and investment avenues. Investment in this sector guarantees consistent wealth generation through property rent and property appreciation over time. Also, the investment avenues offered by this sector are vast. Some of these avenues include retail spaces, office buildings, warehouses, and industrial properties.
Though investments in the commercial real estate sector are reaching an all-time high, not all segments are receiving the same attention. Some segments remain less explored and promise greater ROIs. These untapped segments of the commercial real estate sector that presents the potential for asset enhancement include:
- Industrial: owing to the increased incorporation of modern technologies like robotics, automation, and the rising need to meet sustainability targets, the industrial segment is evolving. Warehousing and logistics are also evolving to cater to the popular demand for same-day delivery. The deployment of electric vehicles and drones will also have an impact on the logistics sector. All of these aspects leave a vast scope for greater ROIs in this segment.
- Hotels: an ample number of old hotel properties are now getting remodeled and repurposed into co-living or serviced apartments. Others are aiming to increase their operational efficiency by adopting proptech more rapidly than expected. This is converting the hotel industry into an exciting avenue for investment.
- Office spaces: workspaces around the country are evolving themselves, especially after the Covid-19 pandemic to accommodate new modes of working including flexible spaces, hybrid models, and the inclusion of wellness amenities. The demand for greener office spaces which pay attention to and adopt sustainability is also on the rise. All these factors are expected to contribute to capital appreciation hence bringing you good ROI.
- Retail: With the e-commerce industry picking up an accelerated pace, the retail industry is also advancing itself. New experiential retail features and F&B are also coming into play and are changing the tenant mix.
When we move beyond segments, next comes demography. Demography wise also, few potential markets remain unexplored. The new less explored commercial real estate market with high potential is Tier II cities. A notch lower the Tier I cities, Tier II cities have a population somewhere between 50,000 to 99,9999. These cities are inexpensive in comparison to their upper-tier counterparts and have developed infrastructure. As these cities haven’t reached their full potential growth yet, they promise long-term profits in the long run. Some of these cities include Lucknow, Bhopal, Kanpur, Indore, Jaipur, Chandigarh, and more.
Post-pandemic, the economy started refashioning itself, leading to a significant change in the commercial and working dynamics. Amidst this, Tier II cities are receiving an unprecedented acceleration in their development pace. The by-product of this development is the rise of work opportunities and sustained infrastructural investments in these cities.
The central government and various state governments are also taking significant measures to advance the development of Tier II cities. Some of these measures include initiating major capital-intensive projects like international airports. The upcoming Jewar International Airport in Gautam Budh Nagar is a suitable example of this. Many of these tier II cities are exploring office leasing opportunities and are inviting retail firms and IT firms. Another player which is raking up numbers in the commercial real estate market is warehousing for e-commerce.