The commercial real estate space is witnessing some emerging trends which are opportunities that businesses are adapting and using to their advantages.
By Kunal Jaiswal
The Indian economy has been witnessing some steady growth over the past few years. The recent slew of reforms introduced by the government have provided the much-needed transparency to the economy. Although there have been a few jerks that have slowed the growth rate, however, the long-term picture still looks positive.
Real estate as a sector has been under pressure largely due to the government bringing in sector-specific reforms to ensure more accountability and transparency into the sector which was otherwise largely unregulated and developer-driven. The investor outlook has been quite positive both for international and domestic players despite the sector witnessing huge reforms. Investors are preferring secure income streams and looking at Grade A options. While some sectors like residential, land remain under pressure, commercial leasing activity has been robust with Grade A spaces witnessing steady rise in rentals and valuations. With large scale changes happening everywhere, the business environment has also witnessed newer trends. The commercial real estate space is witnessing some emerging trends which are opportunities that businesses are adapting and using to their advantages.
Over the past few years, a large number of companies both domestic and international have leased significant space to build and operate co-working centers across multiple cities. They have propelled small, medium and large even in some cases large occupiers to take up space with them which is largely due to the fact that they provide quick and ready space solutions to run businesses. The growth has been so rapid that co-working operators are now looking to grow at a never before seen speed largely riding on pre-commitments from their existing clients. A large number of players within the co-working space has ensured competition which has resulted in better service quality and competitive per seat pricing, making the deal overall sweeter for the occupier. The momentum surely seems to be favoring the co-working operator and more space take up on the co-working front is expected in the coming few years.
ORC’s (Office retail Complexes):
Another emerging opportunity that has been quite successful is the growth in the development of Office Retail Complexes. The growth of ORC is a great example of the change in the mindset of developers. ORCs are planned to mix well with the office crowd and for retailers it’s a foreseeable business. Retail as an industry is an integral part of economy and retail developments act as epicenter for the community for their leisure & shopping needs. Owners of successful assets have managed to keep footfalls intact and are even growing in certain cases primarily due to their extensive efforts in getting the right mix of tenants for their assets basis their customer profile.
Retail as an asset category was under tremendous pressure and many developers did shy away and even shelved their plans to build malls primarily due to excessive vacancies in malls coupled with low rents. A good retail mix in an office complex provides a lot of ease to the office occupants and values to the assets.
The increasing occupancy levels in Grade A commercial developments are having a positive impact on rental trends,which has again ensured increased investor confidence in the commercial real estate asset category.
(The author is Senior Associate Director, Office Services, Colliers International India)