[ecis2016.org] Sankey Prasad, managing director and chairman at Colliers International India, reveals how commercial real estate is likely to continue its bullish streak of 2019, well into 2020
Q: Commercial real estate has outperformed residential real estate for the last few years. How would you rate its performance this year and what is the segment’s outlook for 2020?
You are reading: 2020 may be driven by office spaces, following highest ever gross absorption: Sankey Prasad, Colliers International India
A: Commercial real estate has indeed outperformed the residential and other real estate asset segments in 2019, and also attracted high institutional investor interest. Rentals have either stabilised or risen due to robust demand. India’s first Real Estate Investment Trust (REIT) was launched earlier this year with incremental returns to date. As a result of this, many office developers are expanding their commercial office portfolios, to augment the demand cycle and monetising their holdings. As per Colliers’ estimates, 2019 is likely to touch the highest ever gross absorption in the range of 51-53 million sq ft for the major seven cities in India. As for 2020, I expect the demand cycle to continue for Grade-A office space and anticipate absorption to be in the range of 50 million sq ft; demand to be driven by technology sector, followed by BFSI and engineering sectors.
Q: Where will the co-working segment be in 2020, especially given the WeWork debacle this year?
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A: The flexible office space segment continues to grow (despite the developments in the industry) and is expected to touch approximately 8+ million sq ft in 2019, which could be the highest ever. Today, India is the second-largest market for flexible workspaces in the Asia-Pacific region after China. Originally conceived as working space for millennials, co-working spaces are now becoming very popular among large and even medium-sized businesses for their affordable infrastructure and business opportunities. India being one of the largest startup hubs in the world with the second-largest freelancer workforce in the world, the demand for flexible and collaborative work spaces is expected to continue in 2020.
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Q: The co-living and student housing segment has seen major growth in 2019. Do you think this asset class will see even greater growth in 2020? Why?
A: New growth drivers in the real estate sector are emerging in the form of student housing, senior living and co-living projects. India, with its demographic diversity is welcoming these new-age concepts creating demand in the segment. The student population along with large number of migrant professionals, especially in tier-1 cities, will steer developers and investors interest in this segment. I believe the void in this sector will soon be filled by organised providers, who will enhance the experience and provide professionally managed living spaces to cater to the demand.
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Q: This year, commercial real estate got the lion’s share of foreign private equity that came into the real estate sector. In 2020, will history repeat itself or could we see more PE investments in other segments like affordable housing, distressed assets, etc.? Why?
A: Commercial office space will continue to lead the segment, especially with investor focus on Grade-A assets under development. Bengaluru, Hyderabad and Pune are expected to be bullish with demand continued to be driven by technology companies. Expectations are, PE investments will still continue to focus on commercial office spaces. However, emerging trends like flexible office spaces and co-living spaces, will garner fair amount of investments in 2020.
(The writer is editor-in-chief, ecis2016.org News)
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