by Akhilesh K Prasad
The year 2018 saw the commercial office market emerge as the frontrunner in a market that has, in the last couple of years, witnessed revolutionary changes in terms of legislation. The implementation of the Real Estate Regulation (and Development) Act, Real Estate Investment Trusts, GST and demonetization at break-neck speed, gave a few hiccups. But the market has now started riding the growth curve once again. That perhaps is the biggest take away from 2018. In all likelihood, this trend will continue through 2019.
Our forecast for commercial real estate in 2019 is based on the following commercial real estate trends:
- REITs: The implementation of Real Estate Investment Trusts or REITs is expected to prove a major fillip to commercial real estate in India. As witnessed in 2018, major real estate players have already started adopting the REIT model. As the model ensures higher returns to investors, it is expected to find more acceptability. Sooner than later, the benefits are expected to trickle-down to other realty players. Eventually, it will result in the improvement of the commercial office market in India.
- Co-working spaces: In recent times, there have been a number of start-ups in India that has subsequently created a demand for co-working culture and flexible working spaces, now popularly known as ‘hybrid’ office spaces. Such spaces provide the option of flexible working hours at an affordable rent and are therefore perfectly suitable for start-up ventures. This trend has provided a boost to the commercial real estate sector, and co-working spaces have mushroomed across metros as well as Tier-II cities. Though there are more than a hundred operators at present, the supply of co-working spaces is still limited. In 2019, this sector is expected to have accelerated growth and contribute majorly to the growth of the commercial real estate market in India.
- Warehousing: In recent times, the growth in the e-commerce market has subsequently led to the demand for organised warehousing. With further changes in the FDI policy, this demand is likely to grow manifold in 2019. The electronics and white goods segment is also expected to play a pivotal role in driving the growth in warehousing in urban and semi-urban areas. In fact, a recent industry report has suggested that India is expected to witness an investment of around Rs. 50,000 crores for the creation of warehousing facilities across the country by 2020.
While the general industrial growth is expected to improve coming out of a sluggish phase, going by our commercial real estate market analysis, the aforesaid three factors are expected to be chiefly responsible for the growth of commercial real estate market in 2019.
An MBA by qualification, Akhilesh has dabbled into various businesses. He is a keen debater, data miner and analytically inclined. His blogs tend to present a fresh perspective on any given matter