As Covid-related uncertainty is fading and the hybrid work paradigm becomes the norm, office space leasing is expected to increase.
With the third wave of the pandemic fading, commercial real estate’s near-term prospects are expected to improve. This segment’s long-term prospects are determined by the rate of economic growth. Commercial real estate in India has strong long-term potential, as it is one of the world’s fastest-growing economies.
Only 1.8 billion individuals have high-speed internet access in 2010. It has grown to 3 billion by 2016. Experts predict that by 2022, the whole world’s population of 8 billion people will have access to high-speed internet. All of these connections paved the way for organizations to embrace remote labor. Before the coronavirus, 4.7 million individuals were working remotely, according to a renowned real estate portal.
Overhead expenses were cheaper, and research revealed that working from home enhanced productivity in many circumstances. Plus, we were able to hire people from all over the world at comparable pay, which is critical in places like the Bay Area and Silicon Valley. The coronavirus epidemic hit, and 88 percent of the world’s corporations supported or required remote labor, according to the studies.
If you believe we’ll all go back to work after the epidemic is over, think again! The statistics and patterns tell a different picture! Fortunately, these improvements will improve the way real estate is done and provide investment options.
Work From Home (WFH) has harmed the prospects of commercial real estate, as businesses have been letting go of leased locations to save money on rent. Corporates are bringing their staff back to work, removing the uncertainty that has surrounded the office as an asset class since Covid’s inception.
In the future, India’s standing in the global economy is anticipated to improve. India’s worldwide market worth has constantly risen. It has evolved from an outsourcing destination to a multinational company’s research and development center. It’s also an important consumer market for goods and services.
According to a renowned real estate website, net absorption in the Indian office sector reached 11.56 million sq. ft in October-December 2021, the most in the recent eight quarters and up to 86% quarter-on-quarter. For the half-yearly period of July to December 2021, net absorption increased by 26% year on year.
Time to enter
Commercial real estate experts say now is a terrific time to invest. WFH has generated doubts in the minds of investors. Companies, on the other hand, are now considering a hybrid work environment in which the office plays an important role. Investor confidence has risen as a result of this.
The market appears to be improving, with lease activity picking up in the top seven cities in 2021. Many offices already have opened, and many more are expected to start soon. As a result, this is an excellent moment to invest in commercial real estate.
A good location may bring a 7.5-10% yearly rental return on office space. There is also the possibility of capital growth. This asset class’s returns are likewise quite consistent.
Locations to bet on
Investors can visit any of the country’s bustling corporate and business districts. Bengaluru continues to witness significant demand from start-ups as well as the IT/ITeS industry. The city’s most popular areas include the Outer Ring Road, Electronic City, and Whitefield. HITECH city and Gachibowli are two of the most popular areas in Hyderabad. It’s MG Road, Sohna Road, and the DLF IT parks in Gurugram. It’s largely OMR in Chennai. The BKC region and Worli are popular tourist sites in the Mumbai Metropolitan Region (MMR).
Apart from Mumbai and Pune in the west, Bengaluru and Hyderabad in the south, and the National Capital Region (NCR) in the north, Kolkata, and Chennai are gaining traction among investors looking for chances. He goes on to say that micro markets in areas with substantial infrastructural development have promising futures.
Investors must carefully pick the property to generate excellent profits. The major concerns should be location, occupier profile, and entry and exit pricing. The property should be in a high-demand area with a consistent tenant profile.
Due diligence is essential. Make sure the property title is clear and that the paperwork procedure goes well. RERA registration is required if the project is still under development. Exiting from a commercial real estate venture can be difficult at times. REITs are thus a viable choice for commercial real estate investment. In India, all REITs are owned by firms with substantial portfolios.
Coronavirus and remote working comes hand in hand in altering people’s business and personal life. Coronavirus didn’t make us want to work from home; it only made it easier for us to do so. From all the work we had previously achieved, we were only able to adjust so swiftly. While the entire impact of that rapid transition has yet to be seen and understood, we now know that remote working is here to stay long after the epidemic has passed. Assetmonk offers individuals who want to invest in commercial real estate without having to manage a physical property the opportunity to buy institutional-grade commercial real estate through a thorough research-based process. Assetmonk helps customers with their investing difficulties and offers a variety of CRE investment options.
FAQ’S on Office Space Investments
Businesses who previously opposed working from home owing to concerns about data security or increased hardware and network expenses may soon discover that they have no choice. Businesses will struggle to justify high real-estate expenses as success stories about increased employee productivity and quality spread throughout enterprises, and some will point to a BAU (business-as-usual) experience.
In the case of residential real estate, WFH had a short-term detrimental influence. WFH, among other things, contributed to the drop in house sales.