The future of a workspace in 2022
The year 2022 begins with the hope that the worst of the pandemic has passed and that, after two years, economic growth will restart. Consumers are gearing up for a post-lockdown shopping splurge, and economic signs are pointing to a rebound. Employment is on the rise, firms are actively hiring, earnings are rising, and consumer confidence is rapidly increasing.
Knight Frank's 2022 Outlook Report suggests that the residential and commercial real estate sectors of the country will be more stable in 2022 compared to the unbalance of 2021 caused by the second wave of Covid-19. (1) During the next 12 months, this shift to growth mode will be instrumental in propelling the real estate industry. India's real estate market is crucial to the nation's economic growth as it contributes 6.5 to 7 per cent to its GDP. In a recent report from the India Brand Equity Foundation (IBEF), the Indian commercial estate market may have faced a minor blip but the data shows that markets have recovered with grace. Now that it is on the mend, it will experience healthy growth in demand, which will skyrocket in the years to come.
As we move forward into 2022, here are a few trends in the industry to keep in mind.
- A surge in demand for co-working spaces - current measures and adaptations due to the pandemic.
The pandemic provided the ultimate test for workplace reform. In order for employees to work remotely, companies have had to invest in digital capabilities. As a way to ensure employee well-being and company profitability, businesses are exploring new working methods while maintaining workplace flexibility. With the emergence of the hybrid workforce, the workspace also had a variety of options, including flexible office options like co-working spaces.
Co-working spaces anticipate that their demand will increase in the next 2-3 years due to the desire for worker flexibility and space re-optimization.
In addition to focusing on employee health and safety, companies will look for ways to promote social distancing and safe interactions. In choosing office locations for expansion, companies will consider how sanitation, hygiene, and well-being of their employees will be met.
- Shop-cum-office space is another opportunity to monetise
The Haryana government has introduced a scheme under which developers can sell plots on which buyers can build up to four floors for office or retail use.
These rules have led to a rise in commercial Shop-Cum-Office (SCO) plots. Early investors have multiplied their capital by several folds as SCO markets have become a remarkable success. These kinds of businesses are advantageous when compared with malls because they offer improved ground coverage, increased leasable space, a freehold property, multiplying rental income, and minimal maintenance.
- Commercial & Residential Development that is Sustainable & Environmentally Friendly
India's real estate industry, both commercial and residential, is expected to progress along the lines of sustainability, governance, and environmental issues. LEED, IGBC, GRIHA, and BEE certifications are now highly emphasised in construction, reducing carbon footprints by a significant amount. These government-approved certifications ensure that the building makes efficient use of natural resources like building material, water, energy and other resources, making it a sustainable and green structure.
A JLL India survey revealed that occupiers and investors agree that commercial real estate will be a game-changer in achieving net-zero carbon goals as sustainability ranks among the top three considerations for leasing real estate along with location and rentals. Sustainable development has become mainstream among occupiers in India, and the real estate industry, both commercial and residential, is at the core of this movement.
As a consequence of the growing need for a sustainable environment, green buildings are in greater demand, so much so that the supply is currently falling short of demand in India. According to the pan-India survey, approximately 87% of occupiers and 78% of investors believe climate risk poses a financial risk. The Indian real estate sector is at the centre of sustainable initiatives in the country.
- Freehold properties are increasingly in demand
Most commercial and industrial plots are leasehold, meaning they can only be occupied for a limited period. The ownership rights are held by government agencies including housing boards and municipal corporations. Unlike leasehold properties, freehold properties belong to their owners and are fully owned by them. To promote expansion and borrowing, the commercial and industrial community has long demanded the right to own properties. As a result of the strong demand, there will be more such properties explored in 2022.
- An increase in demand for data centres
Currently, India's data centre market has an estimated critical IT capacity of 445 MW, and another 290 MW is expected to be added by the end of 2022, pushing it to 735 MW by then. Demand for secured data centres is driven by several factors, including work-from-home mandates, online education, video-based medical consultations, and a surge in e-commerce.
Data centres have a bright future thanks to the government's determination to make data localisation mandatory. Moreover, data centres are gaining traction as a promising alternative real estate asset sector.
The demand for data and IT centres raises the demand for commercial real estate. The centres cater to a huge physical workforce that requires a functional, hospitable and futuristic commercial workspace.
Commercial estates are highly adaptable to future modifications due to their ever-growing industry. A well-equipped environment supporting retail or office in a competitive market is increasingly drawing the interest of perceptive investors. By leveraging on this new emerging concept, blended commercial spaces will undoubtedly benefit investors in mitigating the risk in their investment portfolio. Commercial real estate will continue to be the favoured investment choice for investors due to its growth prospects and generous returns. Although businesses analyse and adjust hybrid and flexible models in the aftermath of the pandemic, assumptions will be challenged, and employment patterns will shift.
Companies and employees are expected to adapt and thrive in 2022, based on the lessons learned during the previous two years, with a more sustainable and environmentally friendly vision of the future.
- 1. https://content.knightfrank.com/research/2156/documents/en/outlook-report-2022-864 2.pdf
- 2. https://www.financialexpress.com/money/top-5-commercial-realty-trends-to-look-out-for-in-2022/2397598/
- 3. https://economictimes.indiatimes.com/industry/services/property-/-cstruction/sustaina bility-as-much-a-priority-for-occupiers-as-rents-in-office-space-selection-survey/articl eshow/90931435.cms?from=mdr