The vaccination drive is picking up pace across the country. The total number of doses administered have gone past the 12-crore mark, quite less when compared to the country’s population of over 130 crore but the numbers are encouraging and promise to pick up pace going forward. With approval to new vaccines the pace will only increase. The government has now allowed vaccines for all above 45 years of age. This is certainly a positive development for the economy and most sectors as life will be back to usual for all of us.
These developments will push things back on track from the current situation which we have been facing for the past year. With this, businesses are likely to ask their employees to start work from the office completely like before. Currently, a lot of businesses are working from the office but with certain restrictions on the number of people allowed to operate from the office to maintain social distancing norms. The commercial real estate segment will be the biggest beneficiary of the re-opening of offices. There were many apprehensions on the demand for office space due to the trend of work from home, but these developments have put all these concerns to rest.
Commercial Realty to attract investments
Even during the year 2020, commercial realty witnessed steady investments from domestic and international institutional investors, the inflows were around $4.8 billion, and metro cities like Mumbai, Bangalore, and Chennai bagged a large chunk of these inflows. A couple of domestic companies raised funds by REITs in 2020 which are primarily Grade-A, rent bearing assets. Quality commercial real estate with an attractive rental yield will continue to attract investment given that we are in a low-interest era, and this is likely to stay till the economic growth picks up substantially. As per a report the commercial real estate sector is likely to show stable performance in FY22. Office leasing activity is likely to pick up with steady rent collections. The expected high growth in the economy is likely to have a positive impact on the commercial real estate too.
Work from home is temporary
Work from home can be a transient phase at best, it cannot replace an office space. Multiple research reports and survey state that employees miss going to their office. Meeting colleagues face-to-face, brainstorming in a group is a necessary aspect of work, especially for creative, thought-led businesses. The size of office space will only increase in the post-COVID era as the layout of offices needs to change to accommodate the same number of people and adhere to social distancing norms.
All segments of commercial real estate to witness growth
2021 will witness growth for the commercial real estate segment. The key growth driver, the IT sector, flexible spaces, and manufacturing will drive demand. High demand will come from the warehousing segment given the boom in E-commerce and local business.
The office space market is on the road to recovery as it is likely to witness an increased number of new completions with well networked, diversified, and tech-enhanced supply. 2021 will be a year in which the commercial asset story will continue to grow and lead the recovery in the real estate sector post-pandemic.
(By Krish Raveshia, CEO, Azlo Realty)