The Indian office real estate market has driven the growth of the commercial real estate sector in the past decades. Widely known as the destination of low-cost outsourcing in the early 2000s, India has transitioned to more high-end processes in the manufacturing, artificial intelligence, and engineering sectors.
The COVID-19 pandemic had an unprecedented impact on the global commercial real estate sector and transformed the perspectives on workspaces. This was reflected in the higher vacancy rate in office properties across India. Despite setbacks, the recovery period for the industry looks positive, with the reopening of offices and an increase in leasing activity.
The introduction of the Real Estate Regulation & Development Act (RERA) and Real Estate Investment Trust (REITs) has attracted investments in commercial estate. REIT is a company that owns, operates, and finances income-generating real estate. Amidst this dynamic investment activity, office properties emerged as the most preferred segment for investment by the foreign PE investors who account for the major share of the total equity investments in Indian real estate as well as high-net-worth individuals (HNI) in India. High rental yields and outperforming returns attract investors of all kinds to this sector.
The future is hybrid and green
One of the COVID-induced changes includes the introduction of a hybrid work model in workplaces across the country. Smaller homes and larger family sizes propelled the growth of flex and co-working spaces in the country. IT-ITes, BFSI, e-commerce, and professional services employees emerged as the key occupiers of these flexible working spaces. Start-ups and small and medium enterprises (SMEs) focusing on tapping the talent of the mobile workforce also resulted in the demand for flex seats.
Environment, social, and governance (ESG) is increasingly becoming an important metric for rating future office spaces by investors and occupiers in India. Large international office space occupiers have net zero emission targets and developers are focusing on the green and sustainability quotient in the buildings due to the high demand for such assets. Penetration levels of green-certified buildings are expected to increase over the next decade.
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