Commercial looks promising in second half of 2021

The economy is likewise returning to normality with increased vigour, with more than 24% of the country's population having received at least one dosage of vaccine. The country's GDP growth rate increased to 1.6 per cent in Q1/2021 from 0.4 per cent in Q4/2020, indicating a gradual recovery. The real estate sector, notably the commercial component that can be considered the backbone of economic activity, has begun to show indications of recovery as well.

The sector has been working overtime to meet the demand for commercial properties around the country. According to a JLL research, gross leasing volume increased by 138 per cent quarter-over-quarter to 14.7 million sq ft in the third quarter of 2020. “In 2021, Delhi-NCR leasing market is predicted to grow by 20-25 per cent, with the majority of activity occurring in the second half of the year. Demand is projected to be driven by technology, BFSI, consulting, and manufacturing occupiers. The Delhi-NCR region has an 8.5 million sq ft supply pipeline, with Gurugram likely to finish over half of it and Noida the rest,” says Sachin Gawri, founder and CEO, Rise Infraventures Limited.

Increased mall opening hours in several locations, a resurrection of food and beverage demand and increased spending all contributed to the swift recovery that began after the third quarter of 2020. Due to its growth possibilities and guaranteed economic returns, commercial real estate will continue to be the preferred choice of investors. “From last one year especially post Covid 2020 we have witnessed a huge leap in Commercial Project Demand in Noida. And yet again in 2021. Following the initial shocks in April and May, economic activity across sectors began to build up in June 2021, owing to declining infections and modest relaxations in lockdowns, both of which are critical for boosting employment and income stability. The fact that people have begun to look at real estate to stabilise their financial condition is a source of optimism,” says, Ajendra Vikram Singh, VP-Sales, Spectrum Metro.

Commercial real estate is proving to be a far more tempting investment option for both individual and institutional investors. Private equity inflows into the commercial market have been increasing; according to a Savills analysis, the first half of 2021 saw roughly 41% of the investment inflows seen in the full year of 2020, indicating that investor confidence is still high. “The first half of 2021 saw office leasing drag to a six-year low. However, with increase in vaccination coverage and economic activity slowly returning to normalcy, the second half looks promising for both office and retail segment. PEs have shown an avid interest in office and retail segment thereby signalling a stability in this asset class going forward. While an immediate reversal in demand going forward is unlikely, the vacancy levels are expected to fall in the coming quarters as physical offices resume and visitors flock to malls. Recent reports have suggested consumers’ intent to increase discretionary spending.,” says Siddharth Katyal, Director (Planning & Strategy), Omaxe Ltd.

Even though 2021 may not be immune to pandemic effects, the foundation for a sector-wide recovery has already been laid. “The recent listings of Indian REITs are projected to boost developers' ability and desire to create more commercial properties, resulting in increased liquidity inflows into the commercial real estate asset class. Existing lease collections remained largely intact, with no significant difficulty in collecting the billed rentals. The situation after this Unlock is different since offices will continue to operate following immunisation, and they will be more likely to follow COVID protocol to avoid further business interruptions. As a result, we anticipate strong leasing activity in the final six months of the year,” says Uddhav Poddar, MD, Bhumika Group.