Among the many different factors influencing the way real estate is developed, transacted and used in India, there are five big major emerging trends that are of both real-time and long-term significance:
Co-working spaces
With a growing start-up ecosystem across India, and the central government creating an enabling environment for entrepreneurship, demand for office spaces has gone up in the last few years. Also, due to the rising number of freelance professionals and consultants in today’s globalised workforce, office communities or co-working spaces are fast gaining in popularity.
Co-working spaces are popping up across Indian metros as well as tier-II cities, and are helping many start-ups get flexible working options at prices they can afford. These spaces offer desks at cheaper rentals, with some also allowing a rent-free period apart from utilities and an office-like look-and-feel to potential start-ups.
Some of the co-working places also work as incubation centres for the urban centres they are based out of. Interestingly, the trend of start-ups that buy/ lease real estate in order to sub-lease it to such tenants is also on the rise.
At a rough estimate, over a 100 of such players are already active across India. This trend is slowly and surely catching up in India.
Crowdfunded realty projects
Crowdfunding helps innovators and inventors raise money for launching their products or services through the internet. The practice involves raising small amounts of money online, from many people across the globe. While other industries have seen the emergence of a more dynamic crowdfunding scene, real estate still has a lot of catching up to do.
Some experts have pointed at the maturing crowd-unding scenario in the USA, where the amount of money raised, the size of deals, and the speed at which they occur have all steadily increased.
In China, the real estate industry is no longer the exclusive preserve of big investors, with property developers turning to crowdfunding to help finance the construction of commercial and residential projects.
Although in its nascent stages in India, crowdfunding can pick up here as well because the financials of many developers are getting stretched. With increased digitalisation and transparency, investors can be expected to open up to this novel way if they can get good returns.
Already, non-resident Indians are allowed to invest in the country’s real estate under the same conditions applicable to residents. Moreover, a marketplace is already bringing together real estate investors as also listing premium plots, apartments and villas. This sector is likely to evolve and grow in the coming years.
Transparency-enabled funding
Two-thirds of the real estate markets globally have shown progress in their levels of transparency over the past two years, according to JLL’s Global Real Estate Transparency Index (GRETI) 2016. India too made improvements in overall transparency scores by moving up four places, with its tier-I cities expected to break into the transparent category in the 2018 rankings.
Out of 109 countries, the top 10 highly-transparent markets alone corner 75 per cent of global investment into commercial real estate (CRE), highlighting the extent to which transparency drives real estate investment decisions. At a time when capital allocations to real estate are growing globally, investors are expecting transparency standards in real estate to be at par with other asset classes.
Capital allocations in excess of US$1 trillion will be targeting CRE within the next decade, compared to US$700 billion now. This growth means investors will continue to demand further improvements in real estate transparency. There’s also mounting pressure from the world’s growing middle classes to weed out corruption from real estate, which will speed up the pace of change, especially in the semi-transparent markets. Social media will also help mobilise people in this direction.
Rise of office-retail complexes
For quite some time now, retailers have been roadblocked by a lack of available quality retail space. At such a time, office-retail complexes (ORCs) are emerging as alternatives to high streets, and even malls, for some categories of retailers such as F&B (quick service restaurants, coffee shops, fine dining, pubs, etc.) or BFSI (bank branches, ATMs, broking services, etc.).
Since a large part of the day of a working individual is spent at the office during week days, retail services benefit immensely by locating themselves close to, or within, business districts. Retail categories such as telecom services, office formals, leather bags and accessories, high-end fitness centres, premium salons, eyewear and mobile manufacturers are now all looking favourably at ORCs.
Of the total retail presence in office buildings across major tier-I cities, a dominant 26 per cent is occupied by F&B and a significant 23 per cent is occupied by retail BFSI outlets. While retailers get the dual advantage of paying lower rents compared to premium spaces in Grade A malls and closer access to their main target segment of office-goers, developers are also open to experimenting more with a mixed-use format rather than a standalone retail format. This way, they can allow for quality retail on the lower floors and commercial spaces on the upper floors.
Tech-friendly spaces
Tech-enabled workplaces are becoming more common across the globe. In USA, research on the budgets of clients’ interior build-outs are showing very interesting results, with IT costs increasing rapidly. Earlier, they were only around five per cent of the overall construction budgets.
More recent budgets show the expansion of IT services from cabling and wiring to more than a dozen items for technology, including access devices, infrastructure, mobility, connectivity, data security systems, wireless connections and upgrades, business-specific apps, company-specific conferencing and presentation capabilities. All of these items can add up to 35 per cent or more of a budget for a truly technology-focused company.
This theme is seen in every tenant build-out today, from traditional law firms to new campuses built by companies like Facebook and Apple. The aesthetics and prestige of an office, which were formerly the primary considerations, are beginning to take a back seat to the technology and the connectivity within buildings. Some corporate occupiers in India are starting to invest more in expansion of their IT infrastructure.
The writer is Chairman & Country Head - JLL India
