Shop-Cum-Offices: A preferred choice for both real estate developers & end users | The Financial Express

Shop-Cum-Offices: A preferred choice for both real estate developers & end users

Market dynamics incentivise commercial real estate developers to push firmly towards shop-cum-office developments.

Shop-Cum-Offices: A preferred choice for both real estate developers & end users
From an investment standpoint, shop-cum-offices enable investors to diversify the risks in their investment portfolios by counterbalancing volatile market fluctuations across relatively more risky asset classes.

The current year has ushered in a paradigm shift in conventional commercial real estate development models. For some of Gurugram’s most prominent realty players, the modus operandi seems to be pivoting towards shop-cum-office (SCO) plots as a more lucrative business model. Various real estate development giants are, therefore, looking to build a more sustainable economic ecosystem incorporating this dual monetisation framework.

According to industry experts, market dynamics incentivise commercial real estate developers to push firmly towards shop-cum-office developments. Since various economic forces are changing the tides of established business models, prudent developers are building integrated buildings that blend shops and offices. This means that the retail shops get regular customers in the form of the office employees they share space with, while the same office employees find logistical convenience to meet all their needs within the premises of their daily workspace.

Developers with a keen business sense have recognised the benefits of this symbiotic relationship and are swiftly shifting toward the new and improved shop-cum-office asset class. In its undiluted essence, this seems like a very straightforward concept. The developer just needs to infuse a thematic spin into retail and commercial plots while allowing occupiers to offer customised products and services that adhere to a marketplace’s essential hygiene requirements. Together they create a seamlessly integrated, logistically sustainable and financially rewarding supply chain.

On the other end of the spectrum are the shop and office owners, who have a win-win strategy aligned with their interests. SCO plots’ affordability enables even nascent entrepreneurial ventures to launch their start-up retail franchise or corporate workplace. For businesses looking to open their first restaurant branch or construct a new office space, SCOs are the most pragmatic investment option.

An SCO ecosystem inherently supports retail and office in a mutually beneficial way. When coupled with other benefits of multi-floored SCOs like more expansive frontage, plentiful parking space and cost-effective power backing, the immense potential of these business models completely outshines their traditional counterparts. Consequently, there has been a prolific increase in the demand for developing these mixed-use commercial spaces.

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From an investment standpoint, shop-cum-offices enable investors to diversify the risks in their investment portfolios by counterbalancing volatile market fluctuations across relatively more risky asset classes. Cash flow, longer leases, and higher income all work in harmony in favour of an intelligent investor. An informed investor with a futuristic vision of investing in a product with a high rental yield and capital appreciation due to the strategic location will result in higher capital appreciation because of the market’s integrated ecosystem.

Several SCO projects have witnessed an exponential property appreciation, which in turn has a cascading effect on the capital appreciation and thus results in a year-on-year rise in rental yields for their investors. It may not come as a surprise then that with its planned infrastructure-driven growth model, Gurugram has exhibited an insatiable appetite for futuristic growth with vibrant SCO ecosystems prospering across the metropolitan city. The SCOs that have evolved in Gurugram are best known for their comprehensive commercial integrations. As Gurugram’s kernel is a melting pot of cultures, so are its SCO plots and wildly varying businesses.

Commercial players in SCO across Gurugram come from various sectors, including hospitality, healthcare, education, IT, retail, and banking. The shop-cum-offices in Gurugram’s Sector 29, 14 and 15 are quintessential examples of this business confluence. Due to their logistical connectivity, favourable circle rates, proximity to residential neighbourhoods, and accessibility to social infrastructure and essential amenities, this commercial asset class has witnessed a meteoric capital appreciation ranging between 80% and 150% in recent years.

With many more shop-cum-office projects being developed by leading real estate developers in commercial nerve centre Gurugram, businesses are not only provided with the flexibility to create their retail shops and commercial offices as per their choice. They can also rent out an entire building or a specific floor based on their business needs. Upcoming marquee SCO projects are expected to include lush outdoor spaces and a wide range of ubiquitous facilities that will provide businesses with the pristine ecosystem they require to thrive and prosper.

Considering the optimistic market sentiment surrounding shop-cum-offices and their strong property appreciation potential, it is easy to see why this asset class has seen unparalleled growth in popularity in the recent past. Extrapolating current commercial real estate development trends across emerging markets in Gurugram, analysts are confident that shop-cum-offices will be the preferred asset class for developers and end-users in the perceivable future.

(By Pradeep Aggarwal, Founder and Chairman, Signature Global (India) Ltd)

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First published on: 29-10-2022 at 13:09 IST