Strong Recovery Expected Across RE Segments in 2021: CBRE

India’s leading real estate consulting firm, CBRE South Asia in the latest findings of its ‘Real Estate Market Outlook 2021 – India’ highlights 2021 trends and dynamics across various segments in the real estate sector in India. With Physical offices here to stay, portfolio optimization and hybrid working are expected to be dominant themes going forward. While well networked, diversified and tech-enhanced supply chains are expected to redefine the sector, Retail formats and configurations will realign as tech and e-commerce are expected to drive change. For the Residential sector, demand revival is expected with strong end-user interest aided by government impetus and incentives by developers ensuring buoyancy.

Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE, said, “Policy reforms and adjustments across sectors in 2020 aided to the pandemic helped in the steady revival of India’s real estate sector and overall economy. Continuing with its commitment towards boosting economic growth, the government continues to lay emphasis on infrastructure development, incentivization for affordable housing and initiatives which have been supporting RIETs, co-living and student housing in India also improving the overall investor sentiment.  We expect to see significant growth across segments including office, retail, residential, among others. Especially with this year’s budget which has provided the hope to infrastructure and real estate industries, we are hopeful for integrated development of both sectors.”

Office Space Outlook  

Overall office leasing volume is expected to witness an uptick in 2021. Post COVID-19, India is expected to retain its position as a preferred global outsourcing destination on the back of low-cost knowledge talent.

Highlights

• Physical offices here to stay, portfolio optimization via the right mix of traditional, flexible spaces and any relevant remote working strategy
• Enhanced global demand expected for services and R&D operations of tech firms; digital transformation of services to drive demand for onshoring, nearshoring and more recently, end shoring operations towards India; Hotelisation of office space via amenities and services through ‘phygital’ experiences; tech-enhanced spaces to serve as a differentiator of quality

Investment & Leasing Outlook

Overall leasing volume is expected to increase sharply in 2021 as supply slippages will reduce going forward. Investment-grade projects will dominate upcoming supply; quality assets backed by institutional players to lead rental increments.

Highlights

• E-commerce and Third-Party Logistics to be the biggest catalysts for change post COVID-19; a higher preference for larger tech-enhanced spaces (more than 100,000 sq. ft.) expected
• Demand resilience to boost global investor interest; greenfield acquisitions via developer-investor partnerships to be the preferred entry route.
• Supply chain diversification and inventory control may impact location strategies; leasing terms to remain flexible.

Retail Sector Outlook

Prominent stakeholders are expected to remain focused on the sector and will continue to focus on reinventing the “experience” while keeping in mind the realignment of existing spaces.

Highlights

• Store size optimization expected to allow for faster recovery and better profitability
• Flexibility to remain key to success – landlords with flexible lease terms, malls with flexible / convertible / open spaces to witness greater retailer interest
• Accelerated growth in e-commerce expected; QSRs, grocery segments to lead retail recovery while consumer electronics would continue to capitalize on “time at home”
• “Physical experience” will be a critical component for omnichannel strategies
• Omnichannel strategies to push retailers to streamline supply chains and focus on workforce planning, automation, inventory management and flexibility in production cycles

Residential Segment Witnessing Revival

As per the report, the mid-end and affordable segments will continue to drive sales in 2021. Developer incentives and an enabling mortgage regime to boost the growth momentum of the residential sector.

Millennials could emerge as a key consumer class; reconfiguration of residential spaces likely and increased demand for digitally enabled homes and larger unit sizes to accommodate home offices

Project execution capabilities and cash flow management expected to take center stage; stress funds to witness greater participation

To mitigate execution risks, developer consolidation and a higher number of JVs / JDs likely going forward

Core and core-plus assets to remain high on investor radar, sectors such as office, hospitality and retail expected to provide investment opportunities. Debt to remain the key source of funding across most sectors; last-mile funding opportunities being evaluated by PE funds, primarily for residential real estate developers. Further evolution of the REIT landscape likely, with a growing number of developers / institutional investors looking to launch their own REIT listings in the medium term; inclusion of varied asset classes such as I&L and DCs expected in the long term.

Flexible Spaces - Flexible spaces to remain key to increasing portfolio agility, providing short-term solutions, and catering to headcount volatility; managed spaces to drive demand.

Real Estate Investment Trusts (REIT) - REITs to have better access to low-cost capital from debt / equity markets; higher liquidity to enable increased capital deployment.

Student Accommodation/Co-living - A reconfiguration of the traditional student housing layout is expected; larger rooms/ single occupancy rooms and larger common areas to allow for compliance with social distancing norms.