2021 is likely to be a definitive year for the economy

Market activity is showing early signs of recovery and we firmly anticipate the revival to gain pace from H1 2021 with the vaccine rollout. India (apart from China) was the only country in Asia Pacific that recorded a positive net absorption in 2020, which is a good indicator for the office markets. The fact that India’s outsourcing industry pivoted very quickly in the pandemic, the increased need for outsourcing and India’s cost-plus value addition (especially in 2020 and over the next 2-3 years) have given a boost to the Indian tech industry.

Improving market sentiment will support office space demand, and timely completion of projects with significant pre-leased spaces will have a positive impact on the net absorption for the year. We expect supply and demand to jump by 10-25% depending on recovery starting from H1 or H2. The influence of the US and EMEA regions could impact the pace of the recovery of course. But India continues to attract robust capital flows and even in the year 2020, and attracted 5 billion USD, just 4% down year-on-year. Office continues to be the focus for international investors with 3 successful REITS, 2 of them during the pandemic, we expect capital flows to continue in the office sector. While the last decade has been encouraging, we see investments growing to 20 + Billions over the next 2-3 years in the commercial space.

Going forward, sectors such as IT-BPM, Captive Centres (GCCs) of BFSI and consulting firms, Engineering & manufacturing and Healthcare & Pharma are expected to drive demand for office spaces. The overall demand from large scale consolidation, expansion and setting up of GCCs is likely to come back by late 2021, followed by a strong rise in 2022. Under present scenario, a more broad-based vaccine rollout will further aid the recovery in H2 2021. As occupier budgets get finalized and workplace/space strategies get further fine-tuned over the next year as a part of return to work, market activity is likely to pick up further steam. With most active deals likely to see traction/conclusion over the next 6-12 months, a full rebound is expected in 2022.

The world will not emerge from the COVID-19 crisis the same as it entered. Yet as we start to look beyond it, I am optimistic. 2021 is likely to be a definitive year for the economy and real estate sector will lay the foundation for long term sustainable growth. We look forward to finding the new normal with flex vs conventional working models, change in per person area allocation, premium assets to be evaluated not on rents alone but on HSE standards too. As we look beyond the pandemic, I do believe that momentum in 2021 to be more robust than 2019.

By Dr. D. K Sahu, Publisher-VARINDIA