Real estate set for strong recovery in 2021, says report


While stating that physical offices are here to stay, the report also points out that portfolio optimisation and hybrid working are expected to be dominant themes in future

Various segments in India’s commercial real estate market are likely to make a strong comeback in 2021, with e-commerce and third-party logistics acting as the biggest catalysts for change, post-COVID-19, says a report by property brokerage firm CBRE India. According to the ‘Real Estate Market Outlook 2021 – India’, physical offices are here to stay and portfolio optimisation and hybrid working are expected to be dominant themes in future.

The report also points out that well-networked, diversified and tech-enhanced supply chains are expected to redefine the sector. Retail formats and configurations will realign, as tech and e-commerce are expected to drive change. For the residential sector, demand revival is expected with strong end-user interest, aided by the government’s impetus and incentives by developers, ensuring buoyancy, it added.

“Continuing with its commitment towards boosting economic growth, post-COVID-19 pandemic, the government continues to lay emphasis on infrastructure development, incentivisation for affordable housing and initiatives which have been supporting RIETs, co-living and student housing in India, while also improving the overall investor sentiment. We expect to see significant growth across segments, including office, retail and residential, among others,” said Anshuman Magazine, chairman and CEO, India, South-East Asia, Middle-East and Africa, CBRE.

Overall office leasing volume is expected to witness an uptick in 2021. Post COVID-19, India is expected to retain its position as a preferred global outsourcing destination on the back of low-cost knowledge talent.

 

Residential real estate outlook for 2021

  • The mid-end and affordable segments will continue to drive sales in 2021. Developer incentives and an enabling mortgage regime will boost the growth momentum of the residential sector.
  • Millennials could emerge as a key consumer class; reconfiguration of residential spaces likely and increased demand for digitally-enabled homes and larger unit sizes to accommodate home offices.
  • Project execution capabilities and cash flow management expected to take center stage; stress funds to witness greater participation.
  • To mitigate execution risks, developer consolidation and a higher number of JVs/JDs likely, going forward.

See also: Home sales, new supply improve in Q4 2020: PropTiger report

 

Office space outlook for 2021

  • Physical offices are here to stay, with portfolio optimisation via the right mix of traditional, flexible spaces and any relevant remote working strategy.
  • Enhanced global demand expected for services and R&D operations of tech firms; digital transformation of services to drive demand for on-shoring, near-shoring and more recently, end-shoring operations towards India.
  • Hotelisation of office space via amenities and services through ‘phygital’ experiences; tech-enhanced spaces to serve as a differentiator of quality.

 

I&L sector outlook for 2021

  • Overall leasing volume is expected to increase sharply in 2021, as supply slippages will reduce going forward. Investment-grade projects will dominate upcoming supply; quality assets backed by institutional players to lead rental increments.
  • E-commerce and third-party logistics to be the biggest catalysts for change, post-COVID-19; a higher preference for larger tech-enhanced spaces expected.
  • Demand resilience to boost global investor interest; new acquisitions via developer-investor partnerships to be the preferred entry route.
  • Supply chain diversification and inventory control may impact location strategies; leasing terms to remain flexible.

 

Retail segment outlook for 2021

  • Prominent stakeholders are expected to remain focused on the sector and will continue to focus on reinventing the ‘experience’, while keeping in mind realignment of existing spaces.
  • Store size optimisation expected to allow for faster recovery and better profitability.
  • Flexibility to remain key to success: Landlords with flexible lease terms, malls with flexible / convertible / open spaces to witness greater retailer interest.
  • Accelerated growth in e-commerce expected; QSRs, grocery segments to lead retail recovery while consumer electronics would continue to capitalise on ‘time at home’.

 

Capital markets’ outlook for 2021

  • Core and core plus assets to remain high on investors’ radar; sectors such as office, hospitality and retail expected to provide investment opportunities.
  • Debt to remain the key source of funding across most sectors; last-mile funding opportunities being evaluated by PE funds, primarily for residential real estate developers.

 

Flexible spaces’ outlook for 2021

  • Flexible spaces to remain key to increasing portfolio agility, providing short-term solutions and catering to headcount volatility; managed spaces to drive demand.

See also: De-densification, expansion to drive office sector recovery by 2021

 

REIT outlook for 2021

  • Real Estate Investment Trusts (REITs) to have better access to low-cost capital from debt / equity markets; higher liquidity to enable increased capital deployment.
  • Further evolution of the REIT landscape likely, with a growing number of investors looking to launch their own listings in the medium term; inclusion of varied asset classes such as I&L and DCs expected in the long term.

Also read all about Brookfield India REIT

 

Student accommodation/Co-living segment outlook for 2021

  • A reconfiguration of the traditional student housing layout is expected; larger rooms/ single occupancy rooms and larger common areas to allow for compliance with social distancing norms.

 

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