Get All Access for $5/mo

How Real Estate Bounced Back From Pandemic-Induced Setbacks The past year has dispelled all previous concerns about the sectoral decrease

By Sudarshan Lodha

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Pexels

The year 2022 has been one of the most promising and bullish years for commercial real estate.

At a total market share of $200 billion, Indian real estate is undoubtedly one of the most significant sectors. Estimated to be a $1 trillion industry by 2030 and contribute roughly 13 per cent of India's GDP by 2025, this sector has caught the fancy of investors worldwide. 2022, in particular, saw a massive disruption for multiple reasons, from a receding wave of the pandemic to a boom in e-commerce and office space absorption and diminishing vacancy rates. The past year has dispelled all previous concerns about the sectoral decrease.

While the CRE market witnessed a significant setback during the two years of the pandemic and consequent lockdowns, the revival in this sector has been momentous in 2022 owing to different factors. Let us take a closer look at these trends that drove the momentum of CRE.

The decline of Covid 19 and increased demand for office spaces

The two years of pandemic-infused lockdowns compelled all workplaces to shut down and engage in work from home module. This trend caused a steep drop in the demand for office spaces, including co-working hubs.

However, as the Covid situation improved and the relaxation of lockdowns, the demand for business places, co-working hubs and hybrid workplaces caught momentum. This increased demand for these places, creating a record-breaking office space absorption of 56.6 million sq. ft., registering a Y-o-Y growth of a staggering 40 per cent. Furthermore, cities like Bangalore, Delhi, Mumbai and Hyderabad accounted for 75 per cent of the total demand.

Increased demand for warehousing segment

The last few years have witnessed a never before growth in India's warehousing sector owing to the increased internet and e-commerce penetration across the country. Valued at over Rs1200 billion in 2021, this industry is expected to reach INR 2,872.10 billion by 2027, expanding at a CAGR of ~15.64 per cent during the 2022-2027 period.

The demand for sophisticated warehousing facilities recorded an unparalleled net absorption of 42.5 million square feet in 2022 compared to 39 million square in 2021. 60% of the total demand came from six significant metros of Mumbai, Delhi, Bangalore, Ahmedabad, Pune & Chennai.

India's emerging IT sector and rising demand for Data Centres

Traditionally India has been lagging in terms of having state-of-the-art data centres. With 14% of total internet users, India has only 6% of the global data centre capacity. However, with the explosion of data consumption and regulatory momentum in creating a robust data privacy ecosystem, this industry has witnessed a boom in recent years.

All these factors are expected to double India's data centre capacity from ~800 MW to 1700 MW by 2025. The year 2022 has been instrumental in contributing to this growth by adding 150 MW in data centre co-location capacity.

Anti-China Sentiment and India's rise as a manufacturing hub

While the global conglomerates and tech giants are in the process of moving their APAC base out of China, India is rapidly emerging as the most favored alternative as the manufacturing and APAC headquarters. This was further confirmed by Samsung launching the world's largest mobile manufacturing facility in Noida and Apple's plant in Hosur.

This growth is expected to bolster in the upcoming years as major FMCG, and tech brands plan to move their APAC base to India. Furthermore, the government's favorable policies like Make In India are also boosting manufacturing on the domestic level, moving beyond the urban areas. Employing over 60 million people, this sector will soon contribute one-fourth of India's total GDP.

This has created a boost in demand for world-class manufacturing hubs creating a massive need for increased supply in this sector.

Rise of democratized investment models

Investment models like REITs and fractional ownership have been gaining traction in the last few years, creating a new arena in this promising asset class. The rise of these models has enabled retail investors with a limited budget to invest in commercial real estate.

Bottomline

India's emergence as the fastest-growing economy in the world has created significant momentum across industries in the last few years. As the first year post the lockdowns, 2022 has been an active year for India's growth in many ways. Infrastructure and commercial real estate, the economy's backbone, have consequently seen the rise like never before. This growth is expected to witness a further boost this year.

Sudarshan Lodha

Co-founder and CEO, Strata

Living

Taylor Swift Has a Lucky Number. And She's Not the Only High Performer Who Leans Into Superstitions to Boost Confidence.

Even megastars like Swift need a little extra something to get them in the right mindset when it is game time.

Business News

How to Be a Billionaire By 25, According to a College Dropout Turned CEO Worth $1.6 Billion

Austin Russell became the world's youngest self-made billionaire in 2020 at age 25.

Making a Change

9 Motivational Quotes from Serena Williams

Serena Williams' historic win at Wimbledon on Saturday left the world in awe of her talent. Here's how she keeps her mental game sharp on and off the court.

Living

12 Upbeat Ellen DeGeneres Quotes to Put You in a Good Mood

In a funk? Some quotes from comedian and TV personality Ellen DeGeneres can turn your day around.

Career

How College Prepares Your Child For Success With This One Quintessential Trait

College may not guarantee success or a job in your chosen field, but it might be the ideal place for your child to learn independence — a trait necessary for success.

Marketing

SEO Trends You Need to Be Aware of Right Now, According to a Seasoned Pro

Navigate the future of search engine optimization to elevate your online presence and drive meaningful engagement.