Guest Column

Commercial Real Estate Set to Evolve on Tech and Consumer Behaviour in 2025

By Prakash Mehta

The year 2024 emerged as a formidable force for the Indian real estate sector, led by robust demand, diversified growth, and investor confidence. The commercial real estate market in 2024 witnessed a year of steady growth, fuelled by a rebound in office demand, rising investments in logistics hubs, and the expansion of retail spaces in emerging markets. Experts say 2025 will see commercial real estate evolving on various parameters. The sector is anticipated to be driven by factors like technological advancements, changing consumer behavior, and a rising focus on sustainability.

In the commercial real estate sector, retail, office, and hi-street segments drive the sector’s growth as the economic drivers and key influencers of urban development. According to CBRE, India’s office real estate market has witnessed an exceptional performance in 2024, with record-breaking leasing activity totalling 53.3 million square feet (msf) from January to September. Despite facing global economic uncertainties, the sector demonstrated resilience, underscoring its critical role in India’s economic fabric.

Further, rising disposable incomes and consumer spending transitioning towards more discretionary spending have fuelled growth for retailers, in turn having spill-over demand for quality retail spaces. As tracked by Cushman and Wakefield, retail leasing activity was concentrated around high streets during recent years. The gap between high streets and mall leasing volume was observed to have widened in 2024, with almost 68 per cent of leasing happening across prominent high streets in the top eight cities.

As the commercial sector evolves, 2025 is anticipated to introduce emerging trends across its segments. In Delhi-NCR, cities like Gurugram are becoming increasingly important markets for organized retail, driven by urbanization, and enhanced infrastructure, creating new growth opportunities for the sector. Retailers are emphasizing curating mixed-use developments at prime locations that combine retail, food and beverage (F&B), entertainment, and even residential or office components, fostering vibrant, all-encompassing spaces.

Besides, in the office sector, the demand for Grade A office spaces is growing as companies adapt to evolving work cultures. With an abundance of multinational corporations and new-age startups choosing to operate from Gurugram, micro-markets like the Dwarka Expressway are becoming prominent commercial destinations for urban professionals. Additionally, sustainability is becoming a key consideration, with green building certifications and energy-efficient designs gaining traction.

Meanwhile, hi-street retail developments are gaining prominence as lifestyle destinations. These areas are evolving beyond traditional retail spaces into vibrant hubs offering a mix of shopping, dining, and entertainment, catering to diverse consumer preferences. This modern retail development is elevating the shopping experience by offering amenities like multi-level basement, four-screen multiplex, food court, hypermarket, restaurant, fashion anchor & multi-activity zone, ample visitor parking at surface level, outdoor patio & water bodies, amphitheatre area for entertainment & performance, and more. As hi-street projects develop, these are becoming attractive options for both retailers and consumers.

Moreover, the commercial real estate sector faces several challenges that could impact growth in 2025. In the retail segment, one of the primary hurdles is striking a balance between physical stores and the growing dominance of e-commerce. While online shopping continues to thrive, brick-and-mortar stores must evolve by offering unique and immersive experiences.

In the office segment, as organizations shift towards remote and hybrid work models, they are opting for more flexible workspaces, which is leading to a decrease in overall demand for office space in prime locations. Additionally, the rising costs of construction and maintenance, particularly in high-demand areas, pose a significant challenge. Developers must navigate increasing expenses while maintaining profitability and offering competitive spaces to tenants.

For the hi-street segment, ensuring consistent footfall amid economic fluctuations remains a major concern. These developments face the challenge of managing high lease rates and operational costs, which can strain tenants, especially smaller businesses. These costs often result in higher prices for consumers, which can deter foot traffic.

Thus, the commercial real estate market is set to continue its evolution in 2025, driven by emerging trends and ongoing challenges. Developers must consider diversifying their portfolios to include mixed-use developments that seamlessly blend retail, office, and high-street spaces, capitalizing on the growing demand for integrated, community-focused environments. By adopting a holistic approach, developers can transform retail projects into dynamic, experiential hubs, create office spaces that cater to flexible and sustainable work models, and reimagine high-street retail as vibrant destinations combining shopping, entertainment, and leisure for a holistic consumer experience.