As businesses open in a staggered manner, the office space segment is expected to lead the recovery in the real estate sector once the novel coronavirus, or COVID-19, pandemic ends, experts at the CII Realty and Infrastructure Conclave on September 10 said.
Ramesh Nair, Chairman, CII Realty & Infrastructure Conclave and CEO & Country Head, India, JLL, expects a broader recovery in real estate only in 2021. “Since May, each month has been better than the previous month for our industry. Growth prospects look brighter for the remainder of 2020 and 2021,” he stated.
Road ahead for the sector Over the next few quarters, he sees consolidation among developers and non-banking financial companies (NBFCs) continuing to accelerate and lenders ending up taking haircuts.
“Stakeholders in the real estate sector need to prepare for long-term impacts of the pandemic. It is time to reinvent spaces, rethink strategies, usher collaboration in workplaces and make them more human. The office is here to stay, but its format and functions may change significantly,” he explained.
On office space segment Experts expect workplaces to undergo massive design modifications and feel that one-size fits all strategy may not work. They see work areas characterised by de-densification, focus on flexible working practices, collaborative technology and an increased focus on health, safety and wellness.
"Offices (portfolios) will be segregated into - front offices, mid offices, back offices, satellite offices, headquarter offices, home offices and co-working offices. So, there will be a combination of core and flexible, long term and short term and urban and suburban. One thing we know for sure – the future will be hybrid," Nair said.
According to Nair, market fundamentals, which over the last few years have favoured the landlords, are now slowly moving towards the tenant. “Occupiers will demand flexibility in lease structures and landlords will limit rental increase to retain existing tenants,” he said at the 12th Edition of CII Realty & Infrastructure Conclave 2020.
Christian Ulbrich, Global CEO and President, JLL, said, “Offices of the future will be less about densely packed floors, and more about providing flexible creative hubs for people to interact, socialise, innovate and learn – the things people have missed most during the lockdown.” Once the pandemic ends, he sees central business districts once again become the beating hearts of major cities across the globe.
Residential segment While the office segment will lead the recovery, experts feel the worst is over for the residential sector.
With home loans rates are at its lowest in 15 years and developers offering attractive discounts, payment plans and schemes, Nair feel this could be the best time to buy property, with buyers trending towards either completed or near completion projects.
Experts see the fastest turnaround will be in the affordable segment of the housing market. They expect consolidation to further gain traction.
Demand for warehousing Warehousing has emerged as one of the preferred investment class with $6.4 billion in commitments announced/investments by institutional investors during 2017-20.
B Thiagarajan, Deputy Chairman, CII Western Region and Managing Director of Blue Star said the numbers of enquiries from the NRI community for warehousing is now increasing.
Seconding him, Chandranath Dey, Head - Industrial Operations & Business Development, India, JLL said warehousing is on a three-dimensional growth path. “The three dimensions are length, breadth and height. In terms of length, growth across the length of the city -- suburban to urban. In terms of breadth – growth across the breadth of the nation from Tier I to Tier II and tier III cities. In terms of height, development of multi-storey warehousing facilities.”
Demand for malls Experts see further consolidation in the retail sector not only among retailers but also mall owners. “Retail leasing volumes will decrease as retailers rethink their expansion plans. There will be lot more revenue sharing deals while existing deals will be renegotiated. Retail and mall owners need to come together and offer deeper discounts to woo shoppers. Mall owners need to undertake an additional round of renegotiations by collaborating and compromising with retailers,” Nair stated.
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