Even though the start was slow, when it picked up, the commercial segment witnessed a significant growth in the post-pandemic era. This surge includes a significant increase in interest in office and retail spaces. Developers are actively launching new projects, and office leasing activities are on the rise. However, there is more behind the scenes that hit the surface.
But before we analyze how the segment adapted to the new reality, it is worthwhile to understand the market's current status, its growth, and future prospects.
India's real estate sector is expected to reach a market size of US$ 1 trillion by 2030, contributing nearly 13% of the country's GDP by 2025. This growth is a substantial leap from a market size of Rs 12,000 crore in 2019. The Indian commercial segment is similarly expected to witness a record increase.
"All sub-categories of commercial real estate, such as retail, hospitality, leisure, and office spaces, are growing significantly. Malls, warehouses, and other leasing facilities are also progressing steadily. Global firms are showing increasing interest in Indian commercial real estate, drawn by the future prospects, prime locations, exceptional amenities, and competitive leasing prices," says Deepak Kapoor, Director, Gulshan Group.
Talking specifically about the Delhi NCR office market, it has experienced a significant uptick in rental rates, reflecting robust demand and the infusion of high-quality supply. According to a recent report by real estate consultancy firm Colliers, there has been a notable 4-8% year-on-year surge in rentals across India's top office markets. Delhi NCR, in particular, witnessed an impressive 8% rise in workplace rents over the past three months. Cushman & Wakefield also reported a nearly 2% quarter-on-quarter increase in office rents in Delhi NCR in the first quarter of 2024, accompanied by substantial annual rental growth of 5%.
"Commercial real estate is booming not just in metro cities but also in tier 2 and 3 cities. A large number of start-ups and companies seeking cost advantages moved to tier 2 cities, transforming commercial spaces there. During the COVID period, there was a significant surge in demand from tier 2 cities through e-commerce, leading brands to open physical stores in these areas. The return to normalcy, coupled with lower prices and interest rates, provided the sector with a much-needed boost," says Uddhav Poddar, Managing Director, Bhumika Group.
"The commercial real estate sector is booming due to high demand, fueled by consumers seeking substantial returns on investment. Evolving consumer demographics and preferences have intensified the demand for Hi-street retail spaces, driven by enhanced shopping experiences & convenience. Apart from retail spaces, there has also been a massive growth in demand for office spaces. The demand for Grade A office spaces is particularly significant. It mirrors the rising aspirations of businesses for modern and sustainable work environments. This growth enhances the real estate sector's contribution to India's GDP, creates job opportunities, and fosters urban development," says Sanchit Bhutani, Managing Director, Group 108.
"What is most important is that the pandemic, to a large extent, has transformed the way people shop. We've witnessed a massive uptick in new formats like Shop-Cum-Office (SCO) spaces, catering to the rise of hybrid work models. Similarly, high streets have regained popularity as consumers seek convenient, open-air shopping experiences. While large-format malls remain a major player, developers are becoming increasingly aware of the benefits of medium- and small-scale commercial complexes. These smaller spaces offer greater flexibility, cater to niche markets, and often require lower operational costs, making them attractive options in the current climate. This shift reflects a growing recognition of the need for diversified commercial spaces that adapt to the evolving needs of both businesses and consumers," says Nandini Taneja, Regional Director - Leasing, Reach Group.
Developers, quick to notice the rapid rise in demand for small and medium format commercial and office spaces, have increasingly come to offer hybrid spaces that offer the best of both worlds to the customers.
As the commercial real estate sector continues to evolve by the first half of 2024, the commercial segment is well-adjusted to the post-pandemic trends. What began as a response to a global emergency has turned into a robust business model, which is continuing to grow and adapt. With ongoing investments, new formats, and expanding opportunities in both metro and smaller cities, the future of commercial spaces in India looks promising
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