· Sustained attractive mortgage regime and government incentives lead to strong residential recovery
· Office recovery strengthens as occupier decision-making picks up
· 3PL and e-commerce drive demand;sustained momentum could yield historically high leasing in 2021
CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm, today announced the findings of its ‘India Market Monitor – Q3 2021’. The report discusses the growth, trends, and dynamics across various segments in the real estate sector in India.
According to the report, housing sales jumped nearly46%Q-o-Q to 50,000 unitsin Q32021 and sales rebounded significantly by approximately 86% y-o-yon a YTD basis. Office leasing activity reached13.5 million sq.ft. in Q3 2021 growing at about 140% Q-o-Q,with the YTD number reaching 25 million sq. ft. for the key cities.With 3PL and E-commerce fuelling demand, the Industrial & Logistics leasing activity crossed 9 million sq.ft. in Q3 2021, growing at about 6% Q-o-Q and touching23 million sq. ft. for 9 months2021.
Mr.Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE,said,“India’s real estate market has proven to be extremely resilient over the last year. The overall outlook for the Indian real estate continues to be positive – back ofan accelerated vaccination drive, policy reforms, and increasing urbanization.”
Mr. Abhinav Joshi, Head of Research- India, Middle East & North Africa, CBRE said, “With ease of restrictions post-COVID’s second wave, the real estate industry has witnessed steady growth. The green shoots of recovery have been observed across sectors – including office, residential, retail, and industry &logistics, which is likely to sustain momentum for next few months.”
Residential– Sustained attractive mortgage regime and government incentives led to strong sectorial recovery:
· Pune led housing sales in Q3 2021 with 33%, followed by Mumbai(23%), Bangalore (17%) and Hyderabad (13%)
· At 47% and 31%, midsegmentand affordable/ budget respectively were the dominant growth driverof sales in Q3 2021
· New project launches jumped by nearly 37% Q-o-Q to reach 48,950 unitsin Q3 2021
· Mid-end and affordable segments to continue driving sales; state government incentives and an enabling mortgage regime to reinforce upward momentum.
· Rental housing to get a boost post the implementation of the Model Tenancy Act, thereby creating an alternate asset class for developers; fillip expected for co-living and student housing segments.
· Increased appetite from millennials and first-time home buyers; larger unit sizes and plotted developments to gain momentum.
· Project execution capabilities and cashflow management would be critical; stress funds to witness increased traction.
· Appreciation of commodity and asset prices as well as hardening of interest rates – key risks that could limit growth in sales.
Office– Recovery strengthenedas occupier decision making picked up. Supply addition in Q3 2021 touched nearly 13.5 million sq.ft. growing by about 30% Q-o-Q:
· Small- to medium-sized deals (up to 50,000 sq.ft.) dominated space take-up with a share of almost 80% in Q3 2021
· Hyderabad, followed by Delhi NCR and Mumbai dominated supply, with a combined share of 84%
· Hyderabad, Bangalore and Mumbai closely followed by Delhi-NCR led demand and accounted for over 80% of total absorption
· As mobility improves and a comeback to the physical office environment picks up, overall absorptionis expected to grow.
· As occupiers recognise the significance of the physical office as a centre for collaboration,connection andculture;a shift in workplace designis likely with more allocation to’we’ space over ‘me’space.
· Occupiers are expectedtoincorporate more flexible spaces while re-optimising their portfolios with the realignment of ‘core + flex’ themes.
· Despite anincreased appetite for hybridwork,the frequency of remote working is anticipated to be low (such as once a month);occupiers are alsolikely to determine their remote workingeligibility post’return-to-office’ strategies.
· Developers are expected to enhance existing assets through better amenities,sustainability and health & safety measures,technological upgradation toimprove occupancies.
· Investors are expected to take note of strong occupiers’expansionintentions and monitor working patterns intheir assets I portfolios;office assets to continue to remain high on the investor radar
Industrial & Logistics–Warehouse leasing activity witnessed a 6% Q-o-Q growth and crossed 9 millionsq. ft. in Q3 2021. Space take-up for the first nine months of 2021 reached 23 million sq. ft.
· Medium-to-large sized deals dominated the leasing activity with a share of 55%.
· Bangalore led I&L demand with a share of 32%, followed by Delhi (22%) and Mumbai (12%).
· Leasing momentum expected to remain strong on the back of demand by 3PL players and e-commerce sectors.
I&L Market Outlook:
· Overall supply to cross 25 mn sq. ft by the end of 2021, while space-take up to cross 32 million sq. ft. in 2021.
· Occupiers are expected to display a strong inclination towardshigh-qualitywarehouses located near consumption hubs.
· Global / domestic investors to target both greenfield and portfolio acquisitions – leading to an increase in I&L investment quantum.
· Increased focus on automation / modern logistics facilities and speedy project completions to be key for developers to accommodate surging demand.
Retail–Retail leasing activity touched 0.6 million. Sq. ft. in Q3 2021 across Grade A malls and high streets, witnessing a Q-on-Q growth of nearly 165%
· Leasing activity was led by Hyderabad (38%) followed by Delhi-NCR (26%) and Bangalore (12%)
· Fashion & Apparel, and Supermarkets were the major growth drivers for the retail segment – contributing 26% and 16%to the demand in Q3 2021
· Lease structures between landlords and retailers are expected to continue to evolve with a greater emphasis on partnerships
· Retailers are expected to go beyond malls and expand footprint in high streets, mixed use, and standalone buildings
· Retailers are likely to undertake digital enhancement of stores to enrich the consumer experience and improve store performance
· Accelerated adoption of omnichannel by retailers to carer to the rapid growth of e-commerce and dramatic shift in consumer demand
· Store designs likely to evolve in-tandem with a shift in consumer behaviourthrough re-shuffle in space allocation