Commercial leasing is expected to gain momentum in the next quarters: CBRE India CEO

As States continue to relax Covid-19 lockdown measures, the real estate sector is witnessing renewed interest, from enterprise clients to home buyers. In an interview with BusinessLine , Anshuman Magazine, Chairman & CEO-India, South-East Asia, Middle East & Africa, of commercial real estate services firm CBRE, shared insights on the new trends emerging in realty. Excerpts:

Our collective journey through the pandemic has been shaped by an understanding that business operations will never be the same. As we move forward, there is an opportunity to make a shift from traditional to more transformational and agile methods. Along with integrating technology, a sustained policy impetus and accelerated investor interest will lead to sustained recovery of the RE sector in India. We are currently witnessing a dramatic acceleration in three trends across most sectors: tech enhancement of spaces, increased flexibility of leasing or portfolios and heightened e-commerce penetration. The residential sector continues to gain momentum as home ownership became a priority.

According to the recent CBRE Occupiers Survey, the commercial segment has also witnessed an upsurge as employees look forward to going back to offices owing to advances in technology, evolving relevance and purpose of physical spaces, and increased focus on wellness strategies.

Metro markets like Mumbai, Bengaluru, and Delhi have been at the forefront to drive recovery across the RE segments, owing to the fast-paced and adaptive lifestyle. However, tier-2 and tier-3 cities are further expected to drive recovery and growth, going forward. We also expect these markets to witness an increase in flex demand owing to the increased focus on distributed working and work-from-anywhere models being adopted by enterprise clients, in the near future.

Real estate sector will see new trends emerge in 2021

The commercial sector is quickly embracing flex plus core workplace strategies. While Bengaluru currently holds the highest flex stock in the country (11.6 million sq ft), the flex segment is expected to witness further growth in cities like Pune and Chennai in the coming years.

The industry has been quick to adapt to the ever-evolving Covid situation and is better prepared now. Besides inducing resilience in their business models, tech-based solutions will also provide a more distinctive and transparent tenant and customer experience. Considering wellness as one of the top priorities, most real estate players have been wise to make decisions that protect the safety and health of all employees, tenants, and other end-users of space. These include incorporating contactless devices at workplaces, altering the seating arrangement at facilities to ensure social distancing, and facilitating resources to streamline work-from-home. The fund allocation towards wellness will have a far-reaching impact on strengthening businesses’ relationships.

The inflow of investment from NRIs has seen a surge since their buying power has improved, given the depreciating value of the rupee, coupled with housing affordability schemes, and the offers and discounts provided by developers. Before the pandemic, affordable and mid-segment housing saw keen interest from NRIs. However, with a better home buying sentiment in the country, luxury properties and larger houses currently top their priority list.

‘Small, medium realty developers find it hard to meet working-capital needs’

One major development that is expected to amplify realty investments from NRIs is the recent approval of the Model Tenancy Act (MTA). The Act is also expected to bridge the trust deficit between homeowners and tenants by making the rental space more transparent. This will serve as a great avenue for NRIs to have an additional source of income from rent without the fear of the tenant not abiding by the leasing agreement.

The long-term outlook for the industry is promising, supported by rising income, favourable demographics, technology adoption, and increasing urbanisation. Personalised and omnichannel strategies could drive retailers’ interest — while simultaneously enhancing end-customer experiences across all touchpoints.

India’s flexible stock is expected to grow by 10-15 per cent (y-o-y) from the current 36 million sq ft in the next three years. In 2020 alone, over 75,000 seats were leased in Flex spaces across India. The market situation continues to evolve and is quite fluid.

What is important to note is that the industry is better prepared to function in this dynamic landscape. Our recent survey highlighted that while the ‘purpose’ of office will change, there continues to be a sustained relevance of physical space. It was also observed that achievable real estate savings due to hybrid/remote working were, in some cases, about 70 per cent lower than estimates. We can expect commercial leasing activities to gain momentum in the next quarters, with a renewed demand for ‘blended’ offerings that include traditional offices, flexible/co-working spaces, and personalised human-delivered services — enabled by new technologies.

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