We are Wealth Clinic Team
CBRE South Asia has released a report called “Real Estate Market Outlook 2022 – India” at the CII Annual Real Estate Conference – “Reinvigorating the Real Estate Industry in 2022 & Beyond.” This report looks at the future of the real estate industry in India and the world.
CBRE’s Anshuman Magazine was also elected to lead CII (Northern Region) for the next two years. The magazine is the chairman and CEO of India, Southeast Asia, the Middle East, and Africa at CBRE.
According to the report, even though the pandemic keeps having ups and downs, the Indian real estate market has been mostly strong. It is now showing signs of recovery and growth projections for office, I&L, residential, and alternative real estate segments. This is a good sign for the real estate market.
As the government focuses on infrastructure and industrial growth, we think the sector will benefit from that. In 2022 we believe the focus will be on DC, logistics, and manufacturing. As investors, developers, and occupiers incorporate health and wellness into their strategies, we expect ESG to become more critical to businesses. Investors, developers, and occupiers will also be more concerned with energy efficiency and reducing their carbon footprint.
According to a magazine, “The second wave of the pandemic was bad for the Indian economy and the real estate market.” Before, we were not very far along. We have come a long way. Across all sectors and segments, there’s been a rise in leasing activity in the last six months. We expect this growth to continue into 2022, and we’re not sure why. A few new industries, like I&L, are expected to grow even faster than they did before the pandemic. People who want to diversify their portfolios and make more money can expect the Indian market for things like DCs and life sciences to grow even more, which will allow them to do both.
There is a good feeling in the office that will last until 2022: Gross office space use is expected to reach 45-47 million sq. ft. in 2022, up about 13%-14% from 2021. Technology companies are expected to keep leasing office space in 2022. Still, flexible space operators, BFSI, engineering & manufacturing, and life sciences companies are expected to play a significant role in the growth of office space take-up. Almost the same way as in 2021, Bangalore, Hyderabad, and Delhi-NCR are likely to be the cities that do the most business in 2022.
CBRE thinks there will be about 51-53 million square feet of new office space in 2022, which is up about 4-5 per cent on a year-over-year level.
Among the trends that could shape 2022: The “5G+” area: There is a good chance that four generations will work together for the first time in history by 2030. Indian real estate will change a lot with the help of technologies in many real estate companies and developers in the next 15 years. SaaS, Artificial Intelligence, the Internet of Things, Robotic Process Automation, Virtual / Augmented Reality, and Blockchain are the six technologies that will be most important in the real estate industry in 2022.
People are still renting space in the industrial and logistics sectors. They expect to rent 35-37 million square feet in 2022, a 20 per cent increase in square feet each year. The growth of e-commerce and third-party logistics companies is expected to keep up with the recovery of the economy and the rise in online retail. As warehouses get taller, next-generation logistics facilities are likely to be the most crucial part of the following supply chain.
Warehousing space: More opportunities for up-gradation and expansion in tier-I cities, new markets in lower-tier cities, and more distribution networks in new logistics hubs will help this growth.
About 32-34 million square feet of new warehouse space is expected to be ready by 2022, CBRE says. The regionalisation of supply chains in Asia and the Pacific is expected to help other manufacturing centres, like India, get more business.
In cities like Hyderabad, Mumbai, Ahmedabad, Chennai and Pune, rental growth was 10% to 20% over the past year. Cities like Kolkata, Bangalore, and Delhi-NCR saw a 2% to 7% rise in rent. Cities across the country are likely to see rent prices rise even more in 2022, especially in high-quality, tech-enhanced, and well-located homes.
In 2019, CBRE Research predicted that India would have 70-75 million tonnes of cold storage capacity and 1.4-1.5 billion square feet of cold storage space. To help the economy grow, e-grocery, food manufacturing and delivery, and life sciences will help.
Retail: Even though Omicron slowed down the retail recovery, we think there will be a lot of pent-up demand to help all kinds of businesses.
This year, there is expected to be more demand for things to grow. Demand for QSRs, supermarkets, electronics, and consumer durables is expected to stay strong.
Stores will become more than “pure retail.” Omnichannel retail and hybrids will become more visible between digital and bricks and mortar. For overcoming supply chain problems, stores might be able to cover the last 50 feet, which is the most expensive part of getting things from one place to another.
The residential sector is growing because of a strong economy and low mortgage rates. Post-Q3 2020, there has been a lot of interest in new projects and new phases in existing projects because of strong sales.
Many things could make capital values rise in 2022, like strong sales momentum and rising input costs that could make developers pass the costs on to homebuyers, so they’ll be able to charge more. However, asset prices are expected to differ across different sub-segment types and cities because unsold inventory and sales growth are expected to drive capital value changes.
Mid-range and low-cost segments will help to keep things going: A steady demand for housing units priced between INR 45 lakh and INR 1.0 crore is likely to push up the need for affordable and middle-class homes in 2022.
Focus on bigger units and planned developments: With the long period of remote work and home-schooling likely to go on, factors like bigger homes, plots that can be rearranged, and ancillary amenities are likely to stay important to developers.
post-covid-19, product planning and alignment with changing consumer needs will be very important. People are emphasising good property management and having access to things like healthcare and daycare centres.
Model Tenancy Act (MTA): If the MTA is passed, it could be a big deal for rental housing in India.
Investing: Investment activity is expected to pick up in 2022, and investors will likely go with the opportunistic route. It’s also likely that alternative investment funds will become more popular in the coming years.
Investments are expected to rise by about 5% to 10% in 2022, so they will be close to the pre-pandemic level of 2019.
A lot of money will be spent on office space in cities like Mumbai and Delhi-NCR and development sites and I&L assets. These investments will spread to cities like Hyderabad and Bangalore in the next few years. The demand for warehouse space is likely to rise in tier-II cities because they have become the new engines of growth. Investors are the potential to want to buy warehouse space in these cities.
In the post-pandemic era, there aren’t a lot of high-quality or core assets for sale. Investors may be more willing to take advantage of opportunities as they rebalance their risk and return in the market.
AIFs want to get a better grip on the real estate market: There will be a lot more AIFs lending to the CRE sector in the future because some of the big HFCs and NBFCs are going to focus more on their retail loan books to improve their balance sheets.
Flexible spaces: Flexible spaces would keep getting more important in occupiers’ portfolios, with new “core+flex” strategies emerging during portfolio expansion and hybrid working.
Data Centers: CBRE thinks there will be more “strategic” IT infrastructure outsourcing deals in 2022. This means that more companies will move from having their own DCs to having their own DCs in colocation centres.
Student housing: With the reopening of universities and businesses, there will be a lot of activity again.
REITs: Operational and financial performance is expected to improve, and more REITs are expected in the office sector.
Life sciences: After the pandemic, there was a significant change in life sciences real estate dynamics. In 2021, their share of office leasing will rise, and we expect that trend to continue in 2022.
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