Commercial real estate will remain a preferred choice for investors – here’s why

India’s commercial real estate market is growing rapidly after the COVID-19 epidemic. Although epidemic-induced closures of cafes, restaurants, clothing stores, supermarkets, shops, multiplexes and offices caused the sector to collapse in 2020 and 2021, the outlook for 2022 is positive. The growing demand for occupants of multiple industries is driving the growth of the commercial real estate sector in India. Also, the steady demand for commercial real estate is paving the way for a brighter future for this segment.

With the improvement in industrial real estate, the situation in the commercial real estate sector in India looks positive for the coming year. Furthermore, aggressive COVID-19 vaccination campaigns across the country have led the government to simplify social distance rules. As a result, working people are increasingly returning to their offices, increasing the demand for office space.

Additionally, the occurrence of multiple strains of the coronavirus has made it necessary to maintain a distance of 5-6 feet between workstations in offices to comply with social distance rules, which, in turn, is driving the demand for more office space. Furthermore, due to the growing trend of remote work, co-workers are also witnessing a growing demand. Thus, lease activities are gaining traction in multiple cities across India, including Tier II and Tier III cities, as a significant number of workers have moved to their hometowns in such small towns due to work-from-home options.

In the wake of the COVID-19 epidemic, commercial real estate developers were driven to adopt PropTech to launch new projects, schedule virtual site visits, and offer commercial features featuring high levels of hygiene and safety. With PropTech taking a leading role in commercial real estate, developers are now designing retail spaces with touch-free and voice-controlled features to ensure maximum security.

Technology, for example, has the potential to become an important tool in commercial real estate because it allows companies to accurately analyze property types, flooring, location and a variety of other factors. In addition, the use of AI and cloud-based technology can help retail real estate developers streamline leasing and other processes by monitoring tenants’ profiles, applications, screenings and more.

Due to advances in technology, commercial real estate has been able to overcome the effects of the epidemic. Also, technology alone will shape the bright future of the segment in the years to come.

In addition, IT parks, logistics centers and REITs are increasingly attracting NRI investors due to their strong capital valuation and rent yield potential, and this trend is likely to continue in the future.

The road ahead

Traditional investors have long viewed real estate as a safe investment option in India. Commercial real estate will be the preferred investment choice for future investors due to its growth potential and profitable returns. Furthermore, government reforms in the commercial real estate sector, such as the Real Estate Regulatory Authority (RERA), will go a long way in encouraging the sector and attracting foreign direct investment in the coming years.

(By Rabish Kapoor, Managing Director, Alan Group)