The last year saw a landmark development in the growth of commercial real estate.
Specifically, Co-working and Grade-A office spaces are the two segments of Commercial Real Estate (CRE) which have seen a massive increase in demand in the first quarter of 2018. The first quarter (January-March, 2018) has witnessed a 23% increase in office spaces, where the absorption across India was recorded at 11.4 million square feet. Also, as the demand for office spaces has risen so have the rentals in commercial markets across India.
“The demand will be well supported by Grade A new office supply of about 117.0 million square feet which is scheduled for completion over 2018-20.” -Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India
Here are some of the commercial real estate trends that we’ll be seeing in the rest of 2018
- Growth Of Co-Working
The pioneering market reforms and policies, have given a boost to transparency and accountability in the real estate sector and have also empowered the customers. Although the absorption of commercial space has increased, the rate of vacancy has declined thus making growth possibilities in the sector higher in 2018. To fulfil the ever-evolving and transforming needs of freelancers, startups and solo entrepreneurs, the demand for co-working has seen a massive upward trend. As per Economic Times Realty report, CRE market is likely to remain robust with increased investors activity, sustained demand from technology companies and growing interest from various industry occupiers like manufacturing, flexible workspace, logistics and warehousing.
- Deviation From Tier 1 Cities
A trend which has gained grounds lately in not more than last 12 months is, exploring the possibility of expansion of commercial spaces in Tier II and Tier III cities. As the capital requirement of Tier 1 cities is high, many startups and e-commerce companies have opted to invest in cities other than the Tier 1 cities. Also, considering favourable state government policies and incentives (both fiscal and non-fiscal) and other infrastructure development projects have started inflow of investments in the commercial real estate in otherwise left out cities. Similarly, in search of cheaper resources, Special Economic Zones (SEZs) and IT Parks have developed in comparatively smaller cities like Indore, Jaipur, Coimbatore and Kochi.
- A surge in Capital Inflow
According to World Investment Report, 2018 published by the United Nations Conference on Trade & Development (UNCTAD), India ranks 11th among the top countries in terms of Foreign Direct Investment (FDI) inflows. Compelling infrastructural changes and enhanced regulations and policies in this sector has led people to invest considerably in the commercial hubs of the country. It is expected to witness increased by the foreign investors in the commercial real estate sector and a higher growth rate. A massive increase is expected in FLL investment.
- Build to Suit (BTS) Maintain Popularity
As per BTS, the organization can design and customize the new facilities to meet its unique commercial needs. The customer expectations are ever evolving thus making BTS a suitable option to opt for. Additionally, BTS can be opted only through long-term lease thus giving a long-term lease solution for the business. As the Software Technology Parks and SEZs are promoted by the government to expand IT and ITES sector, company’s preference for BTS spaces and pre-committed large office spaces is increasing.