Strong recovery across realty segments likely in 2021, logistics to lead, says new report

A strong recovery is expected across various real estate segments with industrial and logistics spaces leading the resurgence in the year 2021. For the residential sector, demand revival is expected with strong end-user interest aided by government impetus and incentives by developers ensuring buoyancy.

With physical offices here to stay, portfolio optimization and hybrid working are expected to be dominant themes going forward. While well networked, diversified and tech-enhanced supply chains are expected to redefine the sector, retail formats and configurations will realign as tech and e-commerce are expected to drive change, CBRE South Asia said in a report.

“Policy reforms and adjustments across sectors in 2020 aided to the pandemic helped in the steady revival of India’s real estate sector and overall economy… We expect to see significant growth across segments including office, retail, residential, among others. Especially with this year’s budget which has provided the hope to infrastructure and real estate industries, we are hopeful for integrated development of both sectors,” said Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE.

Continuing with its commitment towards boosting economic growth, according to him, the government continues to lay emphasis on infrastructure development, incentivization for affordable housing and initiatives which have been supporting Real Estate Investment Trusts (REITs), co-living and student housing in India also improving the overall investor sentiment.

Overall office leasing volume is expected to witness an uptick in 2021 as post COVID-19, India is expected to retain position as a preferred global outsourcing destination on the back of low-cost knowledge talent.

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Enhanced global demand expected for services and research & development operations of tech firms; digital transformation of services to drive demand for onshoring, nearshoring and more recently, end shoring operations towards India.

In industrial and logistics space, overall leasing volume is expected to increase sharply in 2021 as supply slippages will reduce going forward. Investment-grade projects will dominate upcoming supply and quality assets backed by institutional players will lead rental increments.

E-commerce and third-party logistics are likely to be the biggest catalysts for change post COVID-19. A higher preference for larger tech-enhanced spaces with more than 1 lakh sq ft is expected hereon. Supply chain diversification and inventory control may impact location strategies and leasing terms are also expected to remain flexible.

In the retail segment, prominent stakeholders are expected to remain focused on reinventing the experience while keeping in mind realignment of existing spaces. Store size optimization is expected to allow for faster recovery and better profitability. Flexibility to remain key to success as landlords with flexible lease terms, malls with flexible, convertible and open spaces to witness greater retailer interest.

During the year, mid-income and affordable housing segments will continue to drive sales and developer incentives and an enabling mortgage regime will help the growth momentum of the residential sector.

Millennials are expected to emerge as a key consumer class and reconfiguration of residential spaces is likely with increased demand for digitally enabled homes and larger unit sizes to accommodate home offices.

Project execution capabilities and cash flow management expected to take center stage during the year with stress funds witnessing greater participation.

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Core and core plus assets are likely to remain high on investor radar and segments including office, hospitality and retail expected to provide investment opportunities. Debt will remain the key source of funding across most segments with last-mile funding opportunities being evaluated by private equity funds, primarily for residential real estate developers.

Further evolution of the REIT landscape is expected as a growing number of developers and institutional investors looking to launch their own REIT listings in the medium term with inclusion of asset classes such as logistics expected in the long term.

Among alternative segments, flexible Spaces will remain key to increasing portfolio agility, providing short-term solutions, and catering to headcount volatility.



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