Commercial Real Estate in India has witnessed phenomenal growth over the last two decades. Government initiatives, economic trends, globalisation and technological developments are leading to the continuous evolution of the commercial realty landscape in the country. From spreading residential catchment areas, to buzzing modern retail and F&B formats to development of premium sustainable tech parks, Indian cities are becoming popular global hubs.
1. Economic Growth:
Economic growth serves as a primary catalyst for the demand for commercial real estate. The demand for offices, retail establishments, and manufacturing facilities rises with the expansion of industries and businesses. Additionally, a growing economy creates employment opportunities, fostering the need for office spaces and commercial infrastructure. Aware of the potential for returns on investments, investors also fuel demand by seeking profitable opportunities in commercial real estate.
2. Rising demand:
Despite the global economic headwinds, office space absorption has been on a steady rise. Majority of the escalating demand arises from IT/ ITeS, retail, manufacturing, BFSI, data centres and flex spaces. India’s startup ecosystem also drives the need for flexible and conventional workspaces, enticing investors from both local and global spheres.
3. Demographics and urbanisation:
With cities emerging as hubs of economic growth and innovations, enterprises are drawn to these urban centres, thereby resulting in a significant influx of people relocating from rural to urban areas seeking better job opportunities. The influx further increases the demand for commercial spaces. The changing demographics, such as the increase in nuclear families and higher disposable income, also add to this growing demand, prompting developers and investors to address these evolving needs and preferences.
4. Foreign direct investment (FDI):
Foreign Direct Investment (FDI) refers to the direct investment by foreign entities into local real estate ventures, bringing in capital, expertise, and innovation. The rapid urbanisation surge, coupled with a growing middle class, has sparked an insatiable demand for residential, commercial, and industrial properties. FDI infusion introduces global business networks, enticing multinational corporations to establish operations in the country. Moreover, FDI frequently brings along technological advancements and elevated standards, driving the need for contemporary, well-equipped and sustainable commercial spaces that meet international standards.
5. Technology and digitalisation:
Digitalisation, along with artificial intelligence and cloud computing, in metropolitan cities has driven the need for collaborative workspaces. Contemporary office spaces now offer state-of-the-art facilities, sustainable designs, and smart solutions to meet the evolving needs of businesses. The CRE sector is adapting to the changing workplace dynamics and leveraging technology to enhance productivity and collaboration, spanning from co-working spaces to contemporary conventional offices.
6. Infrastructure development:
The overall development of real estate depends on the expansion of transportation networks, comprising airports, highways, and metro systems. Government initiatives to develop infrastructure, such as industrial corridors, smart cities, and special economic zones, have increased the demand for commercial real estate. Businesses are also drawn towards areas with improved connectivity, facilitating smoother movement of goods and services, minimising logistical challenges, and potentially lowering operational expenses.
7. Retail sector growth:
With increasing consumer spend across the nation; the retail sector is witnessing significant expansion, driving an increased need for retail spaces and commercial properties. With an expansive middle class, evolving consumer preferences, and higher disposable incomes, there’s a heightened demand for shopping centres, malls, standalone stores and F&B outlets across various cities and regions. The rise of organised retail has also led to the emergence of new retail formats such as High Street, Malls, Hyper markets, Exclusive stores, Mixed use, etc designed to cater to the needs of modern shoppers.
8. Real estate investment trusts (REITs):
With the launch of the first REIT listing in 2018, investors had the opportunity to own a fraction of commercial real estate. Their presence has infused liquidity into the market, offering a diversified investment avenue while reducing the barriers to entry for individual investors who may not have the capacity to directly invest in large-scale properties. REITs’ transparent structure and mandatory distribution of a significant portion of their income as dividends further attract investors seeking regular returns.
India’s commercial real estate demand is driven by the amalgamation of the above factors. Businesses and investors have leveraged these elements to unlock the vast potential and opportunities within India’s thriving commercial real estate industry. As the country continues to grow, it is imperative for stakeholders to remain updated of the evolving trends. The coming years are poised to witness a significant growth in real estate investments due to the relatively lower volatility and higher returns offered by the real estate market compared to other investment avenues.