2022 outlook for Indian commercial real estate sector
2021 has been one challenging year for the real estate sector. However, despite the disruptions, the space regained its balance and seems to be stabilizing in 2022. In fact, according to Knight Frank, 2022 will be a stable year for the commercial real estate space in the country, owing to improved employee sentiments and return to the office.1 This return has been creating a bigger office space demand.
“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,” - Shishir Baijal, Chairman and managing director, Knight Frank India3
According to IBEF, the real estate sector in India is expected to reach USD 1 trillion in market size by 2030, from USD 200 billion in 2021.4 The expected office space demand over the next two years is expected to reach 11.67 million sq ft.3 Increased expansion of IT and ITeS firms is expected to drive this demand growth.
One of the silver linings of the pandemic for the sector is the acceleration of otherwise gradual growth of several new trends in the workspace sector.
- Owing to safety and ease, flexible and co-working offices have become everyone’s preferred avenue. According to CBRE, the country's flexible space is estimated to expand by 10-15% YoY, in the next three years.
- Aggressive government policies, expansion strategies, and emerging ecosystems have led to an increased demand for Grade A office space.
- The rapid digitalization of workspace due to the pandemic has created the need for more data centres. The Indian data centre market is expected to house 735 MW of critical IT capacity by 2022.
- Hybrid workspace is the new buzzword with the flexibility to work from the office as well as from home. The shift from traditional work style to co-working and hybrid systems have encouraged even the bigger enterprises to adopt these new models. In fact, the blend of commercial real estate, Grade A offices, and co-working spaces with high-end infrastructure is gaining high momentum.
Glancing at the real estate investments, firms are expected to raise more than Rs. 3.5 trillion in 2022, predicts IBEF.4 There will be an increase in both long and short term NRI investment, with Bengaluru being the preferred property investment destination.
Looking at all these data and statistics, one can say that the commercial real estate segment is regaining its momentum rapidly and is moving towards a digitized and adaptive era. However, with the discovery of new COVID-19 variants, it still needs to be seen how the situation turns out for the rest of the year and what percentage of these predictions stand true.