Will commercial real estate market rebound to pre-pandemic levels in 2021?

Will commercial real estate market rebound to pre-pandemic levels in 2021?

Commercial was one of the few resilient segments within the market that weathered the pandemic storm of 2020 quite well. Barring malls and hospitality, most subsegments held their own. With the recent announcement of the vaccine in India and its adoption over the course of the year, one would expect the workforce to return to office albeit with increased flexibility given the work from home trend witnessed over the past year. The need to adopt dedensification measures, keeping in perspective social distancing norms along with heightened health measures, will lead to a demand for larger quality spaces. The Indian IT industry continues to be competitive and should attract global interest given that most businesses will look to become more efficient in their path to recovery from the pandemic, thereby providing demand for office space through increased offshoring to India. Two large commercial asset transactions in South India towards the end of 2020 are evidence of the fact that the commercial asset story in India is intact and that the successful launch of India’s second Investment Trust (REIT) during the pandemic will provide further impetus to the office story. More developers are looking to launch issues during 2021. Returns from the listed India REITs have been quite attractive when compared to global REITs, thereby the same will continue to attract global investors.

At the same time, the success of REITs has given global investors the confidence that there is an institutional exit available for their commercial asset investments.


Warehousing and data center segments saw significant traction in 2020, and will continue to attract investments given the boom in e-commerce, the need for cold chain infrastructure for pharmaceuticals including vaccines, increase in the use of data and government initiatives for storing data in India. Few states in the recent past have also announced data center specific policies which should help boost investments in this segment. Global investors such as pension funds and sovereign wealth funds continue to be bullish on the India commercial asset paradigm and have established investment platforms with local developers for commercial assets, both for completed assets as well as to develop to core for office, warehousing segments, etc. These investment platforms are likely to deploy funds in 2021.

As vaccine adoption occurs across the country, India will slowly but surely look to getting back to the pre-pandemic normal, which will result in people visiting malls. At the same time, corporate travel should pick up during the second half of 2021. Malls could see more variable based rental models being adopted by tenants as well as repurposing spaces for fulfilment centers, etc. The expected uptick in corporate travel and encouraging trend of domestic tourism witnessed in December 2020 should help in some recovery in the hospitality segment during 2021. 2021 should be a year in which commercial asset story will continue to grow and lead the recovery in the real estate sector post pandemic.


Gaurav Karnik is a partner and national leader – Real Estate, EY India

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