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Commercial real estate (CRE) is property used for business-related purposes or to provide workspace rather than living space. This broad category of real estate can include everything from a single storefront to a massive factory or a warehouse. There are many categories of commercial real estate such as retail and office space, hotels and resorts, shopping malls, restaurants, and healthcare facilities. The business of commercial real estate involves the construction, marketing, management, and leasing of property for business use.

The Indian commercial real estate market is undergoing a dynamic transformation, characterised by a plethora of emerging trends and crucial factors that are transforming the business landscape.

The sector is witnessing the evolution of workspaces, retail experiences, and industrial infrastructure, bolstered by robust government policies and a growing demand for modern, eco-friendly, strategically located commercial properties with a strong focus on sustainability, technological innovation, and adaptability.

Economic Growth

Economic growth serves as a primary catalyst for the demand for commercial real estate. As the economy expands, businesses require infrastructure to support their operations, leading to increased demand for commercial real estate.

India’s robust economic growth is propelling the need for industrial, residential, office, and public spaces, which are among the major trends in the commercial real estate sector. India’s thriving economy is driven by factors such as GDP growth, increasing urbanization, employment rates, consumer spending, a growing middle-class population, and expanding industries. These factors contribute to the rising demand for commercial spaces, attracting investors seeking to capitalize on the growth potential. Multinational corporations and domestic enterprises, ecommerce and logistics sector, manufacturing and R&D set-ups are extending their operations as the nation develops as a worldwide economic powerhouse, which is driving up the demand for office space, co-working spaces, retail centres, and industrial establishments.

Increasing Urbanization

Rapid urbanization, coupled with the country's burgeoning population, has led to an increasing need for commercial real estate, particularly in urban centers and emerging business hubs.

With a growing population and influx of people from rural to urban regions, India is rapidly urbanizing. To accommodate the growing business and workers, this urbanization trend has increased the demand for commercial areas such office buildings, retail stores, and industrial parks. Moreover, the growing popularity of mixed-use developments, including residential, commercial, and recreational spaces are also positively influencing the commercial real estate market share.

Significant Technological Advancements

Technology development has elevated commercial real estate to a new level. It is now feasible to offer virtual property tours, improve customer relationship management, conduct online transactions, and improve communication between the seller and the buyer thanks to cutting-edge technology like artificial intelligence, virtual reality, and data analytics.

Flexible Workspaces

The gig economy and the growth of remote work have increased demand for flexible workspaces. The growing popularity of co-working spaces and shared office spaces has given construction owners a new opportunity to create flexible, cooperative spaces.

Co-working spaces are revolutionizing commercial real estate. They provide everything from high-speed internet to meeting rooms, making them a preferred choice for many businesses. Popular with startups and freelancers, these spaces offer flexibility without long-term commitments. Even established companies are seeking collaborative work environments that foster innovation and provide cost-effective solutions. IT-ITes, BFSI, e-commerce, and professional services employees have emerged as the key occupiers of these flexible working spaces.

Foreign direct investment (FDI)

India’s remarkable GDP growth has attracted significant foreign direct investment in recent years. The government’s efforts to improve the ease of doing business, simplify regulations, and promote foreign investment have resulted in a surge of international companies establishing their presence in India. As a result, there has been a rise in multinational corporations and global companies setting up their offices and operational centres in the country. This increased FDI inflow has positively impacted the commercial real estate market of India, creating a high demand for office spaces and commercial properties.

Moreover, FDI frequently brings along technological advancements and elevated standards, driving the need for contemporary, well-equipped and sustainable commercial spaces that meet international standards.

Infrastructure development

Infrastructure development has been instrumental in shaping the commercial real estate in India. To support the growing economy and accommodate the influx of businesses and population, the Indian government has prioritized infrastructure development across the country. Government initiatives to develop infrastructure, such as industrial corridors, smart cities, and special economic zones, have increased the demand for commercial real estate.

Development and expansion of urban transport networks comprising roads, airports and metro systems in the cities enhanced accessibility and connectivity, making cities more conducive for businesses. Infrastructure projects across key cities have catalyzed the growth of commercial real estate, attracting both domestic and international investors. Businesses are drawn towards areas with improved connectivity, facilitating smoother movement of goods and services, minimising logistical challenges, and potentially lowering operational expenses.

Emerging Startup Ecosystem

India’s vibrant startup ecosystem and its emergence as a global innovation hub have further fuelled the demand for commercial real estate. Startups and technology companies, especially in sectors like information technology, e-commerce, fintech, and biotechnology, have been actively expanding their operations and seeking commercial properties in India. Many Indian cities offers a favourable business environment, a skilled workforce, and proximity to educational institutions and research centres. This influx of startups and innovation-driven companies has injected dynamism into the commercial real estate market in India.

Changing demographics

With increasing consumer spend across the nation; the retail sector is witnessing significant expansion, driving an increased need for retail spaces and commercial properties. With an expansive middle class, evolving consumer preferences, and higher disposable incomes, there’s a heightened demand for shopping centres, malls, standalone stores and F&B outlets across various cities and regions. The rise of organised retail has also led to the emergence of new retail formats such as high street, malls, hyper markets, exclusive stores, mixed use, etc. designed to cater to the needs of modern shoppers.

Government Initiatives and Reforms

The Indian government has implemented a number of measures and reforms to advance the real estate market to attract both domestic and foreign investment. The goals of programmes like “Make in India,” “Smart Cities Mission,” and “Digital India” have been to improve infrastructure, simplify regulatory procedures, and foster an atmosphere that is conducive to business. By encouraging investments, boosting urban development, and enhancing connectivity, these initiatives have had a favourable effect on the commercial real estate market.