Blog Summary
It’s no news that real estate is the most solid investment there is. Being one of the largest sectors in the world, the Indian real estate sector contributes an estimate of a whopping 6.5 to 7 percent to the Gross Domestic Product (GDP). This blog will discuss, in general, how the commercial real estate market – one of the most fruitful real estate types – is performing and the trends to look forward to for the future.
Introduction
The real estate sector is the second largest sector in the world, after agriculture, and is responsible for generating a large chunk of employment while also contributing immensely to the economy.
“ According to a Times of India article, the recovery in the commercial sector and flight-to-quality trend is expected to keep rents on a stable increase in 2022. “
One of the reasons real estate is one of the most sought-after choices of investment is the different types of real estate you can choose from. There are four main types of real estate one can invest in.
Four Main Types Of Real Estate For Investment
– Residential real estate – Residential real estate is that type of property used mainly by residents to live.
– Commercial real estate – Commercial real estate comprises income-generating properties. These may include shops, office spaces, retail and wholesale shops, and more.
– Land – Land is that type of real estate on which no infrastructural development has been made. The investor can either choose to develop the land into a property or simply resell it.
– Industrial real estate – Industrial real estate is property used for industrial purposes like warehouses, manufacturing units, and more.
According to multiple forecasts and reports, 2022 looks very promising for the real estate sector at large, with residential as well as commercial sectors having the potential to perform well.
In this blog, we will discuss the commercial real estate market in India in detail, including its performance and trends. Read on!
Commercial real estate sector 2021 – 2022 – A performance report
The commercial real estate market in India is currently bullish and if you are looking to make an investment in commercial properties, now would be a good time to take it forward. In this section, we will discuss more the Indian commercial real estate sector and its performance between 2021 and the first quarter of 2022.
Commercial real estate sector in India
The commercial real estate sector in India is one of the most sought after investment avenues. Commercial real estate in India is divided into segments in two ways – By type and city-wise. When we look at the city-wise segmentation, the sector is segmented by key cities like:
- Chennai
- Bengaluru
- Hyderabad
- Mumbai
- Delhi
- NCR
- Kolkata
- Pune
- Ahmedabad and The rest of India
Commercial real estate sector in India
When we look at the Indian commercial real estate market’s type-wise segmentation, it goes as the following:
- Office spaces: Commercial property that can be purchased or rented out to business people for the purpose of setting up offices to run their business.
- Retail spaces: Retail spaces are nothing but shops that cater to customers directly. By selling or renting retail spaces, income is guaranteed.
- Wholesale spaces: Wholesale spaces are also B2B (Business to Business) shops. These are usually more spacious than retail spaces as they sell to retail owners directly and also deal with goods in bulk.
- Industrial spaces: These are commercial spaces that are used by different industries to set up warehouses, manufacturing units, and more.
- Logistics spaces: These spaces are like industrial warehouses that act as assembling and distribution hubs for industrial businesses.
- Hospitality spaces: Hospitality real estate includes those properties that serve the hospitality industry and the service industry at large. These include lodging, restaurants, theme parks, entertainment hubs, etc.
Indian commercial real estate market’s type-wise segmentation
Residential property, sometimes, can be considered commercial property when it is rented out. These are the different types of commercial property, of which office, wholesale, retail, and industrial are top-tier in terms of importance and popularity.
Top cities for commercial real estate investment:
Since the Indian commercial real estate market is segmented city-wise as well, growth is also measured in terms of which city contributes the most. We will see the top cities that performed well in Q1 of 2022 in the coming sections. The following are the cities that have continually and consistently been top choices for commercial real estate investment in no particular order:
- Mumbai
- National Capital Region
- Bengaluru
- Chennai, and more.
Top cities for commercial real estate investment
Let’s take a look at how the commercial real estate market has performed through stats and data. Stay with us!
How the Indian commercial real estate sector has performed
2021 has been very rewarding, to say the least, for real estate on the whole, and that includes the commercial real estate sector as well. It is noteworthy that the commercial sector that faced a dip, thanks to the multiple lockdowns imposed due to the coronavirus spread, is now well on the road to recovery. This is mainly because companies are looking to reopen their offices, having developed a hybrid work culture for better employee comfort.
In this section, we will see how the commercial real estate market has performed in the past year through to the 1st quarter (Q1) of 2022. Keep reading!
According to a report by Construction Week, the commercial real estate sector in India is expected to grow at a CAGR (Compound Annual Growth Rate) of 13% approximately.
– The demand for office space has been and is still on the rise. Many companies in sectors like Business Processing Management (BPM), IT, Banking, Financial, and Insurance Services (BFIS), and more are on the lookout for more office spaces, thereby generating a huge demand for the office sector.
– Economic Times, in a report, noted that office space’s gross absorption enjoyed an all-time high in the first quarter (March 2022). The gross absorption stands at 13 million square feet (MSF), which is a whopping 3x increase Year-On-Year (Y.O.Y) – the first time in 2 years – according to Colliers. Colliers is a real estate services and investment management company.
– Economic Times also reports that a JLL study suggests that the Grade A office market across the top seven cities is forecasted to grow over 1 billion sq. ft. in size by 2026. The Indian office sector is noted to have recovered the fastest from the pandemic’s aftermath.
– Another Economic Times report pointed out that cities like Bengaluru, Chennai, and Delhi NCR dominated the office space leasing absorption in 2022’s 1st quarter. Leasing activity saw a growth of 97% year-on-year (Y.O.Y) and reached 11.4 million square feet (MSF).
According to a news18 article, the following are the top city’s office space leasing shares in the first quarter of 2022
Office Space leasing shares in the first quarter of 2022
- Bengaluru: 3.5 MSF of office space leased out, with a rise of 5 per cent Y.O.Y.
- Delhi NCR: Recorded a gross leasing volume of 2.3 MSF, with a rise of 37 per cent Y.O.Y.
- Chennai: 1 MSF of office space leased out. The city also recorded a 124 per cent Y.O.Y. rise.
- Hyderabad: 1.6 MSF leased out, with a 72 per cent Y.O.Y growth.
The leasing activities in the first quarter of 2022 were shared by the following sectors:
- Technology corporations – 34%
- BFSI firms – 17%
- Flexible space operators – 13%
- Engineering & manufacturing firms – 12%
- Research, consulting, and analytics firms – 11%
Leasing Activities in the First Quarter of 2022
Commercial real estate: The Chennai market
Chennai has been contributing majorly to the growth in India’s commercial real estate sector. According to a report on Chennai’s office market for the first quarter of 2022 by Cushman & Wakefield:
> Chennai’s net absorption nearly doubled on a quarter-on-quarter (Q.O.Q) based to 0.53 MSF in Q1-2022.
> In addition to this, the city’s office space inventory is expected to have over 14.22 MSF of office space added to it over the next 3 years.
Chennai’s Commercial Real Estate Market 2016 to 2022
Chennai was one of the top 3 cities that led the office space absorption activities in the first quarter of this year. This further strengthens the growth forecast for the commercial real estate sector in the city.
Commercial real estate trends for the future
With the real estate market having had a year of growth and the commercial real estate sector seeing consistent growth, it is safe to say that the commercial market is getting back on track. Residential real estate also saw a sudden surge in demand through 2021, and the commercial sector did not fall back too, with many corporates and businesses expressing interest in expansion.
With the market showing an upward trend, the following are the trends that the commercial sector can look forward to in the coming year(s).
1. Flexible spaces are set to witness growth in the coming years. This is credited to the fact that a major chunk of people prefer flexible, co-working offices owing to safety and convenience. Since the pandemic, the demand for co-working, flexible spaces has been on the rise. And according to a report by Hirav Shah, CBRE has forecasted that in the next three years, the country’s flexible space is estimated to witness an expansion of 10-15% Y.O.Y.
India ranked no. 2 in the global race for the most number of co-working spaces. United States ranked no.1 and United Kingdom ended up in the third place. (Source)
No. Of Coworking Spaces By Countries in 2022
2. Sustainability and environmental friendliness are in focus. Commercial real estate property builders and developers (residential too) are looking to go green with their assets. The world is undergoing a green movement, and therefore, this is one of the ways forward for the Indian real estate sector. There are different governing bodies in the country like LEED, IGBC, GRIHA, and BEE that inspect properties and certify them as ‘green buildings’. Many developers are placing more emphasis on these certifications. Green buildings are constructed to significantly reduce carbon footprints.
3. Shop-cum-office spaces are the newest addition to commercial real estate. Investors or business people can use them either for retail or office purposes. Many new-age investors seem to be looking to smartly utilize their commercial spaces. Shop-cum-office space is the new trend in the commercial real estate market, as investors are looking to diversify their portfolios. The Haryana government has already approved the concept of a shop-cum-office (SCO) space, which is nothing but plots on which 4-floor buildings can be constructed. SCOs are therefore expected to catch up across the rest of the country soon.
These are some of the trends in commercial real estate that investors can look forward to. As noted earlier, commercial real estate marketing in India is catching momentum, especially with companies looking to reopen offices. In addition to this, with the rise of the hybrid working models, co-working spaces which are part of the ‘flex market’ are also seeing good growth. According to Economic Times, the flex market is all set to double up its footprint across the top 5 cities and reach 75 MSF by 2025 and cross 100 million MSF by 2030. Overall, it is a great time to invest in commercial real estate as the market is bullish.
FAQs – Commercial Real Estate Report
1. What is the future of commercial real estate in India?
Commercial real estate is an extremely lucrative investment avenue. Known as the safest and most secure form of investment, the commercial real estate future is bright. With India being a growing economy with advancements in technology and various other industries, the demand for commercial real estate is only on the rise. If you are looking for a commercial property, consider investing in Market of India, Chennai. It is India’s upcoming largest wholesale and retail marketplace and is a one-of-its-kind organised centre for trade and business.
2. Is now a good time to invest in commercial property?
When it comes to commercial property, there is no good or bad time to make an investment. Commercial real estate is that type of real estate that has great appreciation value, no matter the market conditions. Are you looking for a commercial property? Market of India, Chennai, is India’s upcoming largest wholesale and retail market. They offer a wide range of commercial spaces, including wholesale and retail, office, and other commercial property.
3. What should I know before investing in commercial real estate?
Before going on to invest in a commercial property, you must be clear with your investment goals. In addition to this, you must know your financial status and details about the property in-depth, including location, history of ownership, the builder, legal constraints and history (if any), prices prevailing in the location, and more. Market of India, India’s upcoming largest wholesale and retail marketplace, is the best place to invest in a commercial property. They offer a wide range of commercial spaces at competitive prices.
4. Does commercial property go up in value in the future?
Commercial real estate is known to have great appreciation value in general. The Return on Investment on commercial property is way better than the ROIs on any other type of investment. There is a constant demand for commercial spaces, and therefore commercial properties do go up in value in the future. If you are looking for a commercial property in Chennai, Market of India is your pick. Being the country’s upcoming largest wholesale and retail marketplace, they offer a range of commercial spaces.
5. What is the future of commercial real estate in Chennai?
Chennai is undergoing rapid development, especially in the IT and Communications, Corporate, and Automobile fields. This has increased the demand for commercial spaces in the city for companies to set up production units and factories. This provides the commercial real estate sector with great scope for growth, making it the most sought-after investment option. Market of India, India’s upcoming largest wholesale and retail marketplace. With 20+ ancillaries that offer support for your business, they offer a wide range of commercial spaces for sale in Chennai.
6. What type of real estate is the most profitable?
Commercial real estate is the most profitable type of real estate. Popularly known as one of the safest and the most secure investments, commercial properties have great appreciation value and offer stable income consistently. They also help build equity quickly and have substantial Return on Investment (ROI). This makes commercial real estate one of the most attractive investment avenues. If you are looking to invest in a commercial property, look no further than Market of India. Being India’s upcoming largest wholesale and retail marketplace, it offers ample scope for trades and businesses to grow.
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