/ -- After gross absorption touched a new high in 2019, office leasing is expected to see some softening in 2020. Colliers believe the residential sector, which has been experiencing a prolonged slowdown, should see some respite in the latter half of 2020.
"Colliers recommends occupiers to focus on optimizing office space by studying user patterns, and by incorporating a flex and core model that suits their business needs. Flexible workspace operators should maintain a tight ship on operations and finances, as investors become more stringent with due diligence," says Sankey Prasad, Managing Director & Chairman at Colliers International India.
As per Colliers International India's latest report India Market Outlook 2020, the top 5 trends that will impact the real estate sector are:
1. Space Efficiency: Focus of Occupiers
During 2020, Colliers forecast gross absorption at about 54.3 million sq feet in India's top seven cities. For comparison, 2019 pan-India's gross absorption was 58.6 million sq feet. They believe that the slow GDP estimates for India should have some bearing on enquiries by mid-scale occupiers. With the tepid business confidence, they foresee occupiers cautious of rapid expansion. Occupiers must focus on optimizing space by a) using technology to study user patterns to use space efficiently, and b) incorporating a flex and core model that suit their business needs.
"The year 2020 will continue to see firm prospects for the property market in India. Bangalore and Hyderabad are expected to be two of the three fastest-growing Asian cities between 2020 and 2024, and that should open further opportunities for occupiers, developers and investors. While Bengaluru will be front runner in terms of demand, Hyderabad is fast climbing up the ranks," said Megha Maan, Senior Associate Director, Research at Colliers India.
2. New age workspaces to gain traction
By the end of 2021, Gen Z population should be one-fifth of the Indian workforce. Colliers foresee occupiers more rapidly adopting workplaces with a collaborative and creative thrust. As per a recent survey, 60% millennials in India seek jobs that allow flexibility, and over 52% feel that their organisation might not have the adequate culture to provide flexible working options. As a younger workforce enters the job market and as technology evolves, they foresee more occupiers adopting new approaches to workspace design, offering options such as a) experiential workplace, and b) flexible workspace options to retain talent. To retain talent, occupiers are providing dynamic workplaces, replete with collaborative spaces, break-out zones.
3. Flexible workspaces to see consolidation
Flexible workspaces have grown rapidly in India since 2017, with the sector garnering 18% share in total leasing in 2019 (leasing ~11.2 million sq ft in 2019). In 2020, Colliers believe that the flexible workspace market should start seeing consolidation, as larger flexible workspace operators with financial discipline acquire smaller companies. Colliers already observes consolidation beginning in the market, with Indian hospitality chain OYO acquiring Gurgaon-based flexible workspace company, Innov8 in July 2019. The market should enter a phase of maturity with smaller players with lesser financial muscle even exiting the market.
4. Residential sector to pick up in latter half of 2020
India's residential sector has been undergoing a prolonged demand slowdown since 2013. Colliers believe that housing sales should pick up in the latter half of 2020, especially from end-users, who should be buoyed by lower interest rates, as well as government reforms, like the Tenancy Act that has the potential to unleash build, lease and operate properties in India, wherein properties are built for rent, not for sale. An accountable and well-regulated rental housing market could be attractive for developers and institutional investors.
5. Investments to rise in opportunistic assets and logistics segment
With funding proving to be a challenge for residential projects due to low liquidity among NBFCs, Colliers foresee immense opportunity for developers in last mile financing. They are already seeing investors evaluating distressed assets, which typically already have approvals in place and unit sales commenced. In such a scenario, Colliers expect developers offloading assets at reasonable valuations. They can expect greater investor interest in distressed assets, especially at the last-mile funding stage (i.e. projects that have been stalled nearing completion stage), as some developers struggle with cash flow.
To download the report, click here: https://campaigns.colliers.com.au/s/c80c9142ffe0fea55a0874c9251e25d9bdf02223
About Colliers International Group Inc.:
Colliers International (NASDAQ: CIGI) (TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.
For the latest news from Colliers India, visit http://www.colliers.com/en-gb/india. To follow them on twitter, simply click on this twitter handle @Colliersintlind and to follow them on LinkedIn, simply click here.
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