The high inflation rate has resulted in a 10%-12% increase in building costs, affecting developers’ expected cashflows and project completions.
Commercial Real Estate Q1 and Q2 Growth and Trends
The need for acceptable workplaces, freehold businesses, residential buildings, and novel ideas that will maximize investment profits will all increase in 2022.
Residential and commercial real estate in India had a stunning rise in 2021. After the nationwide lockdown, demand for residential flats and plots increased, driving up property prices as well as prices per square foot. The market was already gaining momentum. The corporate world has started to indicate interest in extending operations, in addition to commercial sectors that serve people’s daily or weekly needs, as a result of connectivity improvements and anticipated economic development.
This year, there could be more money invested in commercial real estate. The need for acceptable workplaces, freehold businesses, residential buildings, and novel ideas that will maximize investment profits will all increase in 2022. According to an Outlook Report, the residential and commercial real estate market in the nation will have a more stable environment in 2022 as opposed to the instability of 2021 brought on by the second wave of Covid-19.
It’s difficult to accept that 2021 is already finished. However, here we are, and it’s safe to say that this has been a difficult year for the real estate industry. Here are several themes that real estate investors should bear in mind as 2022 approaches.
Analyzing the anticipated real estate trends for 2022
Companies have adopted the hybrid work technique as they recover from the epidemic and learn to keep up with ongoing developments. The beginning of new leases and the inauguration of new offices give us hope that by the end of 2022, the real estate sector will regain its footing.
The rental business will increase by January 2022
Companies are renewing contracts and expanding commercial office leasing spaces before standardizing the complete office system. For the same reason, real estate leasing activity is expected to soar starting in January 2022.
Demand for co-working spaces is increasing
Office closures significantly increased in 2020, and there was a quick global transition to ubiquitous remote work. This pattern persisted in 2021, but as the vaccinations spread, people began to gradually return to their jobs. The ultimate litmus test for workplace digital change has been this epidemic. To enable workers to work from home, businesses have to make investments in digital capabilities. To guarantee a balance between employee well-being and corporate profitability, businesses are looking into innovative working practices while putting workplace flexibility at the forefront. The expansion of a hybrid workforce in a range of workplace alternatives, including flexible offices, has been the most obvious change
Flexible workspace operators anticipate growing their portfolios over the next two to three years as a result of the need for worker flexibility and portfolio re-optimization. The market for adapt-to-suit workplaces will advance due to several key factors, including hub-and-space models, increased financial gains, growth in the number of strategic partners, acquisitions, demand-driven expansions, and a focus on technology, health, and safety.
Another way to make money is through SCO Shop-cum-Office space
The State Government’s new planned colony policy has approved the novel idea of a Shop-cum-Office (SCO) plot. Developers may sell plots where customers can build up to four stories and utilize them for offices or retail under the plan put up by the Haryana government. Due to these regulations, a new age of commercial SCO plots is emerging. The SCO markets have been a tremendous success, with early investors’ cash rapidly growing by several times. A prudent investor can profit from consistent cash flows, longer leases, and higher income, to name a few.
The deciding elements for knowledgeable investors with a long-term investment horizon are the capital growth and greater rental returns brought on by the marketplace’s integrated ecosystem. The benefits of this sort of commercial building over malls include increased ground covering, leasable space that exceeds saleable space, freehold property, multiplied rents, and substantially less maintenance.
Environmentally responsible and sustainable commercial and residential development
In the Indian real estate sector, progress is anticipated to be facilitated by factors like governance, sustainability, and the environment. Investors looking to make knowledgeable company investment decisions are now placing an increased emphasis on transparency and stakeholder participation. The attention that developers are currently placing on LEED, IGBC, GRIHA, and BEE certifications in the building is significantly reducing carbon footprints.
Rising interest in free-hold real estate
Most industrial and commercial plots are leasehold, which means they may only be utilized for a certain period, often 99 years in some states. In this case, ownership rights belong to governmental entities like housing boards and municipal companies. On the other hand, the owner of a freehold property has total authority over the property.
The demand for the ability to own properties has been made by the business and industrial sectors for a very long time to encourage growth and borrowing. To make conducting business easier, industrial rules must be written to permit the conversion of leasehold to freehold industrial plots. Since there is currently a significant demand, more of these properties will be investigated in 2022.
Demand for data centers is rising
The COVID-19 pandemic’s massive digital push has been beneficial for data centers, which may still offer a rental yield of about 15% annually. As soon as India entered lockdown due to COVID-19, businesses started to upgrade their digital infrastructure to adapt to the new working environment, which led to a 25–35% increase in the usage of data center capacity.
An estimated 445 MW of essential IT capacity is now housed in the Indian data center industry, and a further 290 MW is anticipated in 2022, bringing the total to 735 MW by the end of the following year. Mandates for working from home (WFH), online learning, video-based medical consultations, a massive increase in e-commerce, and business-related webinars and video conferencing are all increasing demand for secure data centers. Data centers’ future is also secured by the government’s decision to make data localization mandatory. Data centers are becoming more popular as a viable alternative asset class in real estate.
Ultimately, the development of the SCO idea will accelerate in 2022. By having a commercial area at reasonable prices with superior facilities, these SCO plots will aid entrepreneurs in developing their company concepts. The advantages of a well-equipped condition are met retail or office in a favorable market are increasingly being recognized by astute investors. By using this newly growing idea, mixed-use commercial buildings will unquestionably help investors diversify their risk in their investment portfolio.