A New Era Of Growth For Commercial Real Estate

With the long-term closure of offices and working from home being the new way, the need for new office space has been adversely affected during the pandemic. Several MNCs and large enterprises are now reopening their offices or implementing a back-to-office programme, making this sector one of the fastest-growing real estate segments. According to the latest report by Knight Frank India, the commercial real estate sector will have stable and sustainable growth in 2022. Therefore, with positive sentiments in the markets, commercial real estate is gaining prominence among large corporations.

Moreover, the Indian commercial real estate market is also booming due to several other reasons, such as the advent of digitization, increased tenant confidence, and the loosening of COVID protocols. Additionally, overall economic growth, transparency, and competency have influenced developers and tenants to move toward commercial real estate. But these are not the only factors driving its growth across the whole landscape. Let us discuss the aspects that fuel the advancement of commercial real estate

Factors pushing the commercial real estate sector toward a rise

The lease agreements of commercial real estate properties are long-term, and every three years there is a 15% escalation in the property rental, making it lucrative for developers. This has fuelled the development of several other office space projects which are under construction and will be operational soon.

Several trends have emerged as a result of the tremendous bounce back of this sector. Leasing activity is intensifying because businesses are updating their real estate investment holdings to mitigate pandemic effects.

Similarly, the hybrid working model facilitated the necessity for leasing office spaces that are dynamic and have smart working spaces, supporting the growth of this sector.

In recent times, Organizations are also preferring managed office space. managed office spaces provide dynamic pricing models that are cost-effective, unlike owning an office and bearing additional and uncontrollable expenses,

Moreover, the scalability options are readily available and help with any sort of expansion without any hassle, making it a preferable option. Furthermore, by leasing these office spaces, the firms get basic amenities and other services available in a shared space under a single subscription.

Commercial real estate will grow sharply due to Hub and Space working models, a focus on technological advancements, growth in the economy; and large-scale institutional investment. 

While co-working spaces are now accepted as business and innovation hubs, what’s less understood is their impact on the wider real estate industry in India. Not only have they changed the face of commercial real estate in large markets, they are also transforming how people work in smaller towns and cities. In addition, there is a domino effect on ancillary sectors such as business infrastructure and interior design.

The fuel for this has come in the form of the explosion of startups in new and old sectors as well as the modern ways of working adopted by businesses across the spectrum. This has led not only to a sharp rise in the demand for commercial space but also in the nature of that demand. 

Despite the economic concerns, optimism surrounds the whole commercial real estate industry due to the myriad benefits for all the participants. CREs are now targeting Tier-II and Tier-III cities as they are rapidly urbanising and businesses are often shifting to these cities to save on operational costs. Furthermore, the inclusion of New Age technology such as sensor-activated disinfectants, retina scanners for entry, digitalized ventilation systems, and more is increasing the affluence of commercial real estate.