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Commercial real estate to remain a preferred choice for investors – Here’s why

Though commercial real estate was hit by setbacks in 2020 and 2021 caused by the pandemic-induced shutdown of cafes, restaurants, clothing stores, supermarkets, shops, multiplexes and offices, its outlook for 2022 is positive.

With industrial real estate thriving, the scenario of India's commercial real estate sector appears positive for the year ahead.

India’s commercial real estate market has been exponentially growing following the COVID-19 pandemic. Though the sector was hit by setbacks in 2020 and 2021 caused by the pandemic-induced shutdown of cafes, restaurants, clothing stores, supermarkets, shops, multiplexes and offices, its outlook for 2022 is positive. The ever-increasing demand from occupiers from multiple industries has been augmenting the growth of the commercial real estate sector in India. In addition, the steady demand for commercial real estate is also paving the way for a bright future for the segment.

With industrial real estate thriving, the scenario of India’s commercial real estate sector appears positive for the year ahead. Moreover, the aggressive COVID-19 vaccination drive across the country has led the government to ease social distancing norms. Consequently, employed people are increasingly returning to their offices, which in turn is propelling the demand for office space.

Additionally, the occurrence of multiple strains of coronavirus has made it necessary to maintain a distance of 5-6 feet between workstations in offices to adhere to social distancing norms, which, in turn, is driving the demand for more office space. Furthermore, due to the growing trend of remote working, co-working spaces are also witnessing a flourishing demand. Thus, leasing activities are gaining traction across multiple cities across India, including Tier II and Tier III cities, since a significant number of workers have migrated to their hometowns in such smaller cities because of work-from-home options.

In the wake of the COVID-19 pandemic, commercial real estate developers were driven to adopt PropTech to launch new projects, schedule virtual site visits, and offer commercial properties featuring higher levels of hygiene and safety. Due to PropTech taking a major role in commercial real estate, developers are now designing retail spaces with touch-free and voice-controlled features to ensure maximum safety.

For example, technologies have the potential to become a vital tool in commercial real estate as it allows organizations to analyze property type, flooring, location, and several other factors accurately. Additionally, the use of AI & cloud-based technologies can help retail real estate developers streamline the leasing & other processes by monitoring tenant profiles, applications, screening, and much more.

Because of advancements in technology, commercial real estate has been able to overcome the effects of the pandemic. Also, technology alone will shape the bright future of the segment in the years to come.

Additionally, IT parks, logistic centres, and REITs are increasingly attracting NRI investors due to their strong capital appreciation and rental yield prospects, and the trend is likely to continue in the future.

The Road Ahead

Traditional investors have long viewed real estate as a safe investment option in India. Commercial real estate will remain the preferred investment choice for investors in the future as well due to its growth prospects and lucrative returns. Furthermore, the government’s reforms in the commercial real estate sector, such as the Real Estate Regulatory Authority (RERA), will go a long way towards boosting the sector and attracting foreign direct investments in the coming years.

(By Ravish Kapoor, Managing Director, Elan Group)

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