Property market: 2022 to be a more stable year, says report

The demand for office space is estimated to be at 11.67 million sq ft over the next two years based on hiring by the top five IT companies in the last 18 months and incremental demand for office space.

A 5% rise in residential real estate prices is expected in 2022. Recovery in the office sector and flight-to-quality is expected to keep rents stable to increasing in 2022.
A 5% rise in residential real estate prices is expected in 2022. Recovery in the office sector and flight-to-quality is expected to keep rents stable to increasing in 2022.

Property consultant Knight Frank’s 2022 Outlook Report says compared to the volatility of 2021, the residential and commercial real estate space in the country would have a more stable year in 2022. A 5% rise in residential real estate prices is expected in 2022. Recovery in the office sector and flight-to-quality is expected to keep rents stable to increasing in 2022.

According to the Knight Frank report released on Thursday, the momentum in residential sales would continue in 2022 as prospective homebuyers’ preferences for bigger homes, amenities and pricing would seal the deals. Shishir Baijal, chairman and managing director, Knight Frank India, said the real estate sector recorded a smart recovery despite the pandemic exigencies in 2021, with segments like residential outperforming others. The disruption caused by the pandemic is slowly settling and the real estate market is expected to gain back its rhythm in the next two to three quarters, he said. “Should we be able to continue at this pace, the real estate sector will see adequate recovery to match or indeed cross the pre-pandemic levels,” Baijal said.

In the office space, incremental demand for IT/ITeS firms is expected to drive growth. The demand for office space is estimated to be at 11.67 million sq ft over the next two years based on hiring by the top five IT companies in the last 18 months and incremental demand for office space. “The commercial office space has been seeing a gradual movement upwards as more and more corporates are recalling their employees to office. Thus, the return to office has steadily increased. Coupled with that the growth in the new hiring across IT firms have confirmed the future of office to be brighter,” Baijal said.

In 2019, the IT sector accounted for a quarterly average of 7 million sq ft of office space consumption, while the average office space leased across all sectors was 15 million sq ft. The office space consumption by IT sector fell during the lockdown with total space leased amounting to 2 million sq ft during this six-month period. However, with a return of normalcy in Q4 2020, the space take-up by this sector again rose sharply to 8 million sq ft. During Q1 to Q3 2021, IT sector leased a total of 8 million sq ft.

Knight Frank expects the flexible space to have a good year in 2022. “As challenges of the pandemic continue with discovery of new variants such as Omicron, occupiers are predisposed to maintaining flexibility in their usage of real estate so the co- working spaces is witnessing a steady growth with shorter and more flexible lease terms allowing them to remain nimble,” Baijal said.

The warehousing segment is expected to maintain the growth rate driven by demand from the ecommerce and 3PL players. “Transactions for warehousing segment, riding on the boom of the e-commerce sector, is projected to grow at a CAGR of 20% from 31.7 million sq ft in FY21 to 45.9 million sq ft in FY23. E-commerce share in total transactions projected to increase to 36% from 31% during this period,” the report said.

The Indian data centre market currently houses an estimated 445 MW of critical IT capacity and addition of 290 MW is expected in 2022 which would take the total count will to 735 MW by end of next year, the Knight Frank report said.

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