Early in the year, the COVID-19 crisis forced the entire commercial landscape of the country to shift due to the uncertainty resulting from prolonged Lockdown & social distancing measures. The Commercial Real Estate (CRE) market is currently witnessing some pain points, but adaptability remains the key to turn all the odds into even. CRE spaces will be nothing like what we knew it to be. They will undergo 360 degrees of change, keeping in mind new safety protocols, but our team of Realty experts is of the view that more or less, the horizon will remain cloudless for the CRE market in the country for the forthcoming quarters. But let us first analyze some of the shifts and factors that will lead to this seamless transformation:
Paradigm shifts in CRE landscape:
Office Decentralization: In Post-COVID-19 times, the density that spaces were outfitted for will no longer accommodate the needs for social distancing, so the space-densification need to be re-addressed. Also, in the case of office realty, the companies will wake up to the need of having multiple offices. Having a team that works across multiple locations is not detrimental to collaboration but counter-intuitively, having remote locations and multi-city locations ease the effort and risk on the part of both employee and employer. This phenomenon can further give impetus to the office leasing market.
Larger/Suburban Office Demand: Owing to social distancing protocols, companies will now need more square footage per employee and this would also lead to an increase in the suburban office market.
The surge in Industrial Real Estate: The other segment of CRE which will see phenomenal growth will be Industrial, with the European nations and America marginalizing China, for its callous approach toward handling the COVID 19 crisis, which has now become a pandemic and has disturbed the world order. India can gain from this and become the next-bourgeoning destination for manufacturing companies in the world.
Rise of Warehousing Real Estate: The other major segment of CRE that is witnessing unprecedented demand is Warehousing; it has emerged as a promising investment opportunity for institutional investors. With the rise of e-commerce in India, and specifically the demand spurt that the e-commerce companies have seen during the lockdown, the warehousing segment has received a significant impetus. The other major demand that will come in this segment is that of having Multi-level warehouses within city limits - as they can help e-commerce players as well as retailers to reduce transportation costs and improve delivery time – the keys to success for most retail businesses, those are now betting big on an omnichannel strategy. In today’s market environment, it is pertinent for retail companies to have warehousing near their customer base.
Factors that will keep CRE afloat:
Most Promising Investment Option: Commercial realty was the fastest growing real estate asset class in the pre-COVID-19 period. It was witnessing fast absorptions, relocations, expansions and in the year 2019, it has been on the radar of all the savvy investors. In the initial three quarters of 2019, CRE got PE investment worth $3 billion and now in the period where gold and crude oil prices have fallen sharply, CRE has become all the more pertinent in the investment world. Furthermore, with the current realty prices being at a record low level, these are henceforth expected to rise owing to a huge pent-up demand once the lockdown is lifted.
Making the journey seamless:
Game-changing Technology: Technology is the name of the game in today’s scenario. With the help of technology, new age realtors and developers are staying in tune with their customer demands and keeping the juggernaut going. Virtual Realty, walkthroughs, chatbots have helped the real estate players to keep the momentum going. Technology is further helping to curate personalized offerings for the discreet customer base. Even in the post-pandemic times, there will be a lot of focus on automation & mechanization to reduce the dependency on manpower. Developers will also build a comprehensive backup model to overcome the disruption in supply chain management. Predictive modeling and data analytics will become the next game-changers.
Apart from technology, the architectural aspect will also be of paramount importance now. Also, co-working spaces will see a lot of traction as companies will seek flexible working models. Retail Real Estate will move towards a revenue-sharing model, as a minimum guarantee model will be inappropriate for now.
Each segment of CRE will witness its own ups and downs but very soon, they all will find their footing again. Until then, let’s hope that real estate developers find enough strength and courage to balance out compliances and regulations, financial issues, demand, and supply matrix.