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    What are the New Opportunities In Commercial Real Estate?

    • 5 min read
    • Last Modified Date: January 2, 2024
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    • Have you ever thought about investing in commercial real estate? Investing in commercial real estate in India in 2024 can present you with rewarding opportunities for growth and financial success. 
    • Innovative office space ideas, top-notch features, prime locations, a business-friendly atmosphere, and other factors have propelled India’s commercial real estate market’s steady growth. 
    • According to a recent research by Mordor Intelligence, the market is expected to grow at a CAGR (compound annual growth rate) of 27.19% from its estimated $67.08 billion size in 2023 to $223.25 billion in 2028.
    • The data demonstrates that because of its unique advantages and long-term prosperity potential, commercial real estate has emerged as a desirable investment option. There have been a number of newly emerging opportunities in the market in tandem with the growth.

    Understanding The Indian Commercial Real Estate Market

    • India’s commercial real estate market has shown steady growth, defying the global trend that has been struggling in recent years. Today, India is the world’s fifth-largest economy, paving the way to become the third-largest by 2029.
    • Over the next few years, it is anticipated that India’s real estate market will grow significantly. According to a joint analysis by EY and NAREDCO, the country’s real estate market is expected to grow from $200 billion in 2021 to $1 trillion by 2030.
    • The sector is expected to contribute between 18% and 20% of India’s GDP by 2030 as a result of a favorable supply-demand gap that will encourage growth.
    • India’s middle class is growing and the country is becoming more urbanized, which is driving up demand for commercial real estate. You can take advantage of this dynamic market and potentially make significant returns through property appreciation and rental income by investing in Indian commercial real estate.
    • Commercial properties can yield 8–9% or more in rental income, along with appreciation, making them a profitable option for retail investors. In contrast, residential properties typically yield only around 2% in rental income. 

    Growth of Commercial Real Estate

    • The potential for substantial rental returns, a rise in the demand for commercial real estate, and the general stability of the asset class are just a few of the factors contributing to the commercial real estate market’s rapid expansion. 
    • Investors looking for a profitable avenue that can withstand economic fluctuations have turned their attention to commercial real estate because of its higher returns, stability, and diversification advantages. In this context, office spaces, commercial stores, and flex space properties have been in high demand.

    The Rising Trends in Commercial Real Estate

    Exceptional office spaces

    • Exceptional office space is in greater demand due to the growth of startups and businesses in Tier-1, Tier-2, and Tier-3 cities. By the end of 2023, over sixty million square feet of office space in both metro and non-metro areas are expected to be occupied, according to a report released by Colliers and Qdesq. 
    • Businesses in rapidly growing sectors like consulting, e-commerce, business process management, and information technology make up the majority of tenants and buyers.
    • Indian commercial real estate is also attracting interest from both domestic and foreign businesses looking to expand because of the nation’s outstanding locations, first-rate amenities, and reasonably priced buying and leasing prices.

    Commercial shops at prime locations

    • According to a CBRE report, leasing agreements for retail spaces have increased by nearly 130% in the past year. Additionally, as transactions doubled to 1.5 million square feet in the first quarter of 2023, chances of significant returns increased. 
    • This demonstrates that a number of factors, such as desirable locations and well-built stores, are contributing to the success of the commercial real estate market. 
    • There’s a good chance that retail businesses will see increased foot traffic and visibility in these areas. These properties can be profitable long-term investments because they usually appreciate in value over time.

    Digital Real Estate Investments will Surge

    • Digital platforms were already in place prior to the epidemic, but their demand grew during and following the outbreak in all sectors of the economy.
    • Some individuals even booked their properties online. Certain phases in the home-buying process, such as the home tour, are moving online now.
    • People’s inclination towards online investing has been further influenced by the rise of REITs and real estate funds. The majority of real estate transactions will take place online since it guarantees transparency and saves time and energy during the entire investment process.

    Rise in demand for flex space centers

    • Due to the adaptability, affordability, and flexibility of flex spaces, businesses are expected to rapidly adopt them, which will drive further growth in the Indian flexible office market. In India, flexible spaces are increasingly important parts of occupiers’ portfolios.
    • According to Colliers, their percentage will likely increase from 5-8% in 2019 before the COVID-19 pandemic to 10-12% in 2023. 
    • Additionally, India has a 6.5% penetration rate of flexible space as of the first quarter of 2023, and this percentage is still rising due to occupiers’ rapid adoption of decentralized and hybrid work strategies in an effort to create contemporary workspaces at affordable prices.

    Fractional Ownership

    • Fractional ownership is a major development driving the significant transformation of the Indian CRE market.
    • Investors can invest in CRE at a reasonable cost due to fractional ownership. Think of it as buying a piece of a larger property, like owning a share of a shopping mall or office building.
    • The fractional ownership market in India was valued at USD 5.4 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 10.5% to reach USD 8.9 billion by 2025, according to a report by Knight Frank.

    The benefits of fractional ownership include:

    • Diversification: Spreading investments over a variety of assets lowering risks and producing a well-balanced portfolio.
    • Access to Prime Properties: Gain access to Grade A commercial properties that were previously only available to institutional investors through fractional ownership.
    • Advantages for NRI Investors: NRIs can take advantage of the management companies’ experience to invest in high-quality Indian assets, which is especially attractive to those looking to buy stable, income-producing properties back home.

    In India, the fractional ownership market is expected to reach 4,000 crore by 2023, up from 1,500 crore in 2019. Benefits such as affordability, diversification, and liquidity have made fractional ownership a lucrative commercial estate investment for the savvy investors.

    New Opportunities in Indian Commercial Real Estate

    India’s commercial real estate market is rapidly transforming as a result of the new opportunities that have appeared recently. There are a lot of new opportunities for investors to profit from as a result of the growth of urban areas, the retail sector, the e-commerce industry, and new technologies.

     Demand for Green Spaces in the Real Estate Market

    • People are becoming increasingly drawn in adding green spaces to their homes as they move towards urban lifestyles. This trend in the Indian real estate market started as a result of growing awareness of the health and well-being benefits of being in nature.
    • People are realising how important it is to have green areas in their houses in order to create a tranquil and soothing atmosphere.
    • There is now a demand for  commercial properties that have both contemporary amenities and green areas due to this change in focus. Adding green areas to a property, like gardens, parks, and plant-filled balconies, also improves its aesthetic appeal.

    Tier II and Tier III Cities

    • Tier II and tier III cities have experienced rapid growth since the implementation of programmes like AMRUT and Smart City. People are gradually moving into such cities. As a result, these cities offer more opportunities for real estate investment.
    • The abundance of employment options in tier II and tier III cities is another factor contributing to their rising appeal.
    • This migration trend presents real estate developers and investors with immense opportunities to tap into these growing markets. They can profit from growing property values and an expanding customer base by making investments in commercial real estate in these urban centers.

    Real Estate Structured Debt

    • Real estate backed structured debts continue to be popular alternative investments, offering potential benefits to both borrowers and investors.
    • These are financial instruments that rely on underlying real estate assets for security and value. In these structured debts, money from several investors is pooled and used to finance or lend money to real estate projects or borrowers. Real estate assets like homes, buildings, and land are usually used as collateral for loans.
    • These instruments are attractive to investors because they have a potential to pay interest on a regular basis and offer the extra security of collateralized assets. Additionally, the diversification that comes with owning a variety of real estate assets can lower risk and stabilize investment portfolios.
    • Assetmonk’s structured debts, backed by high-quality real estate assets, present additional investment opportunities with an assured IRR of 17%.

    PropTech and its Potential Opportunities

    For developers and investors, the rise of PropTech—a term that refers to technology-driven innovation in the real estate industry—has created plenty of new opportunities. From AI-powered tenant screening to smart building automation, PropTech solutions offer immense potential to enhance operational efficiency and tenant satisfaction.

    Relying on technological prowess, Assetmonk has been a top player in the proptech industry. In order to meet the individual needs of investors, Assetmonk aims to offer wise real estate investment options. 

    Commercials Spaces with Offices

    • In recent times, there has been a rise in the trend of commercial shops along with offices in the real estate market.
    • There has been an increase in the quantity of commercial real estate investment opportunities in 2023 as a result of numerous investors from various regions choosing these types of commercial properties.
    • Bengaluru and Gurugram are the two main areas where this trend is most apparent out of all the regions. Therefore, in order to meet the needs of this new real estate trend, real estate developers are creating a lot of projects here.

    Co Working spaces

    • Coworking is widely accessible, making it simple for anyone to give it a try. The trend of coworking is growing in popularity as more individuals choose to work from home instead of an office. Anyone who is able to work remotely will find value in a coworking space.
    • In India, coworking spaces are becoming more and more popular among businesses; in the last four years, demand has doubled.
    • Coworking spaces saw a notable increase from 14% in Q1 2019 to 27% in Q1 2023 of the net absorption of 8.2 million sq. ft. across the top seven cities.

    Bottom Line

    India’s commercial real estate market is brimming with fresh, exciting prospects. There are many opportunities for developers and investors to consider, ranging from green construction and the growing retail sector to developing metropolitan areas, the need for e-commerce and storage, and technological disruption.

    In 2024 and beyond, it is anticipated that India’s commercial real estate market will rise to new heights.When it comes to positive growth in commercial real estate and rentals, this market is currently among the most favorable. 

    As a result, in 2024, there will be a plethora of new opportunities in office spaces, retail stores, and flexible space properties. Additionally, it is anticipated that commercial real estate in India will grow at an exceptionally high rate overall. For astute investors, therefore, looking to navigate the ever-evolving investment landscape, commercial real estate will present enticing avenues because of its attractive returns, long-term benefits, portfolio diversification, and resilience against market volatility.

    Ready to embark on your commercial real estate investment journey? Assetmonk is a dedicated alternative investment platform that provides investors with exceptional alternative investment choices backed by real estate. With just Rs.10 lakhs investment, Investors can earn an exceptional Internal Rate of Return (IRR) of 17% by tapping into growing private markets worldwide. 

    Carefully curated from India’s thriving private markets, these investment opportunities are overseen by a trustee registered with SEBI. Investor’s can now enjoy the advantages of stress-free investing and attractive high returns with Assetmonk. Start Investing Today!

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    FAQ’s

    Q1. Is it a Good time to Invest in Commercial Real Estate India?

    A. The real estate market is expanding quickly along with the economy, particularly the commercial real estate sector. Thus, now is the ideal time for investors seeking a high rate of return on their investment to make purchases of commercial real estate in India.

    Q2. What is the Best Return on Commercial property?

    A. Structured debt real estate emerges as the most favorable investment choice where Investors can secure a guaranteed Internal Rate of Return (IRR) of 17% through alternative investment platforms such as Assetmonk.

    Q2. What is the trend in Real Estate in India in 2024?

    A. The five years between 2023 and 2028 are projected to see a growth rate (CAGR) of 9.2% in India’s real estate market. Looking ahead, the Indian real estate market seems to have a bright future filled with continuous expansion and development. 

    Fractional ownership is gaining popularity, allowing investors to own a share of high-value properties. This investment model offers benefits like affordability, diversification, and liquidity.

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