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Upward momentum continues in the real estate sector in 2022: CBRE-CII Report

September 14, 2022: CBRE South Asia Pvt. Ltd., on Wednesday released its ‘Indian Realty – Charting the growth roadmap for 2022’ report at CII Realty 2022 – 18th Edition of Conference Real Estate. The CBRE-CII joint report highlights key trends and projections for the Indian Real Estate sector for 2022.

Key Highlights:

Leasing activity across real estate assets has witnessed an uptick in H1 2022 and is expected to grow further in H2 2022. 

  • Office space absorption outlook revised upward from previous projections and is expected to touch 53-57 million sq. ft. by the end of 2022
  • RE investments grew by 4% Y-o-Y in H1 2022 to USD 3.4 billion; Investments to touch USD 6 billion by the end of 2022, metros continued to account for a bulk of investments
  • Retail witnessing robust recovery due to unleashing of pent-up demand and continued strength of e-commerce; Y-o-Y growth of 166% caused leasing activity to touch 1.54 million sq. ft. in H1 2022. Strong supply pipeline lined up for H2 2022.
  • The residential sector is likely to witness both sales and new launches to reach a decadal peak in 2022 and cross the 200,000-mark. 
  • Industrial & Logistics (I&L) sector to clock a growth of ~12% on an annual basis, with leasing activity remaining range-bound at 28-32 million sq. ft. in 2022
  • In H1 2022, flexible space operators accounted for over 6 million sq. ft. of office leasing activity in India. Their stock in India to cross 80 million sq. ft. by the end of 2025.

Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE, said, “The real estate sector in India performed well in H1 2022 amid the evolving market dynamics. As economic recovery continues to gain momentum, we expect a further boost to the leasing activity across the sectors. We estimate alternative segments such as flexible space will pave the way for innovative new age RE solutions and supplement economic growth. Robust policy and regulatory environment will encourage overall infrastructure growth in the long term.”

Excerpts from the report: 



As markets reopened across India, enquiries and inspections picked up pace and the quantum of RFPs across cities grew. This buoyancy was particularly visible in Q2 2022, which witnessed record leasing activity – space take-up grew by 220% Y-o-Y in Q2 2022 to 18.2 million sq. ft. Overall, in H1 2022, 29.5 million sq. ft. of leasing activity was recorded, up 157% Y-o-Y. Given the growth, we expect gross absorption to rise to the 53-57-million sq. ft. range by the end of this year, a revision from our previous growth prediction. 

Supply addition was recorded at 16.7 million sq. ft. in Q2 2022, a 64% increase Y-o-Y. So far this year, supply addition has crossed 26 million sq. ft., up 26% Y-o-Y. In line with the expected demand, we expect a spurt in the addition of investment-grade supply across markets in the coming quarters, causing us to revise our supply forecasts to 54-58 million sq. ft. for the entire 2022.

  • Tech firms accounted for 30% of the space take-up in H1 2022, leasing by other sectors too witnessed growth on an annual basis
  • Moderate rental growth of 1-5% was witnessed in several micro-markets across the major cities; select locations also witnessed rents rise by up to 6-9% in Q1 and Q2 2022
  • Several occupiers are either implementing or planning to implement health & wellness and sustainability measures due to the growing prominence of adopting ESG criteria in their operations

Top trends expected to shape 2022

  • Hybrid working remains the most favoured workplace policy. We, however, expect a divergence in workplace models basis individual departments, business lines and even geography. 
  • The adoption of activity-based working (ABW), hotdesking and targeted mobility (TM) is likely to gain momentum in the coming years
  • The impact of the recession in the US and some European nations could be felt in the Indian office market as well.

Industrial & Logistics 

We expect the overall leasing activity in 2022 to remain range-bound at about 28-32 million sq. ft., a growth of up to 12% on an annual basis. We anticipate that this space take-up would be led by the continued expansion of 3PL, FMCG and manufacturing players against the backdrop of macro-economic recovery. 

Similarly, annual supply is likely to be slightly lower than our previous estimates. However, as supply chain bottlenecks have started to ease in recent months, we expect supply addition to improve in H2 2022 and about 25-28 million sq. ft. of new warehouses to become operational during the entire year – a growth of up to 12% on an annual basis.

  • Warehousing facilities with features such as high ceilings to accommodate automated stacking systems, sufficient loading / unloading zones and power back-up provisions are likely to gain more traction. Warehouses in India would typically feature a clear ceiling height of 29-33 ft. during 2017-19. More recently, completed facilities feature ceilings in the 37-42-ft. range, which allows extra vertical storage space. This can increase space efficiency by as much as 15-25%.
  • Reopening of offline stores led to a short-term drop in appetite for new space from e-commerce players. However, we expect their leasing sentiments to improve over the coming quarters as consumer sentiments are improving owing to the festive season. 
  • Focus on operational efficiencies could lead to growth in ‘flight-to-quality’ leasing. In line with the demand, we anticipate development completions by organised players to increase.
  • Further, rising transportation costs are likely to drive occupiers to continue to lease more space. E-commerce and 3PL players would thus prefer to take up space closer to consumer hubs. Moreover, 3PL occupiers dealing with cargo handling would focus on securing warehouses closer to key transportation nodes. 
  • Capital flow is expected to continue from both global and local players, with both greenfield and brownfield acquisitions remaining attractive. JVs / JDs / partnerships are likely to remain the key investment routes for both greenfield and brownfield acquisitions.

Top trends expected to shape 2022

  • India likely to remain a key manufacturing destination and among the top seaborne exporters by volume and thus driving demand for I&L assets. 
  • Developers to consider emerging logistics hubs by investing in land banks closer to new infrastructure initiatives and lower tier cities. 
  • The need for occupiers and developers to strengthen their ESG performance is anticipated to rise; new-age warehouse specifications would now include features such as green certifications, along with energy-saving & green operations.


According to the report, retail is witnessing robust recovery due to the unleashing of pent-up demand and continued strength of e-commerce; Y-o-Y growth of 166% caused leasing activity to touch 1.54 million sq. ft. in H1 2022. 


  • Stores increasingly blending industrial with retail, and simultaneously satiating customers’ need for an outing 
  • Many home-grown direct-to-consumer (D2C) brands are contributing to demand and taking up space across leading cities to build their physical store network – a trend which is expected to continue this year.
  • Placemaking would gain further ground as developers look to make their offerings less transactional, and more inventive and exclusive. The aim would be to create destinations where people want to go, and not just need to go.

Top trends expected to shape the future

  • Growing institutional capital in retail spaces as expansion and consolidation gain steam and new brand entities emerge.
  • Brands expected to increase the number of stores and rightsized their portfolios. 
  • Tier II, III and now even Tier IV locations are gaining traction as developers and retailers look to leverage the spending power of these regions.
  • Greater presence of education- and health-focused centres in retail clusters, leading to diversification of developer portfolio. 

Residential Sector

According to the report, unprecedented sales and launch momentum has been witnessed in H1 2022. Property prices have increased across most micro-markets and across segments due to record sales and developers’ decision to pass on rising construction costs to buyers. However, monetary tightening by the RBI to tame inflation could raise financing costs.

  • Appreciation in asset prices could be selective going forward: Asset prices have witnessed an uptick on account of strong momentum in sales as well as the developers’ decision to pass on the rising construction costs (on account of growing input and labour costs) to buyers.
  • Unsold inventory levels could continue its southward trajectory: We are currently witnessing a fall in unsold inventory levels across most top cities of India, except a select few locations. The fall is attributed to robust sales despite steady new launches. As a result, inventory overhang at a pan-India level is at a six-year low, with average quarters to sell for projects falling from over 15 in 2017 to sub-9 levels in H1 2022.
  • Better alignment needed between developers’ focus and buyers’ expectations: While developers are now increasingly focusing on larger ticket sizes (over INR 1-2 crore), demand for units priced at less than INR 1 crore have continued to dominate sales in H1 2022. Similarly, the share of units sized 1,500 sq. ft. and above has grown in new launches, but sales continue to be led by units sized between 500 and 1,500 sq. ft.
  • Strong momentum in land acquisition to continue: We have also witnessed growing interest from both developers and investors alike in this sector. Of the nearly USD 5 billion deployed to acquire about 4,000 acres of land / development sites between 2020 and H1 2022, the residential sector accounted for almost 36%, the highest among all real estate sectors.  

Top trends expected to shape 2022

  • Growing dependence on alternate investment funds for financing projects: With a couple of mid-to large-size housing finance companies (HFCs) reducing their exposure to the corporate loan book, we expect that the developers’ dependence on alternate investment funds (AIFs) could continue to grow. Since the cost of raising funds from an AIF is typically higher than that from the HFCs, the overall cost of financing could increase.
  • Profit margins could come under pressure: An upward trajectory is expected in financing costs amidst monetary tightening measures being undertaken by the RBI to tame inflation. However, the immediate impact would primarily be felt on the new borrowings and would be limited for old borrowings due to the possibility of older instruments being locked in at a fixed cost for longer period. As a result of the rising financing cost, developers’ profit margins could come under pressure. The most impacted category of developers could be those operating in the affordable and mid-end segment, as they have already been impacted by rising inflationary pressures.
  • Changing product alignment owing to consumer demand: The incidence of providing access to facilities such as healthcare, daycare and education within real estate projects to increase. This could even extend to EV charging infrastructure in the times to come, given the move towards sustainability.

RE Investments

Enthused by the robust recovery of the real estate sector in India, investments in this space grew by 4% Y-o-Y in H1 2022 to USD 3.4 billion. The office sector dominated investment activity during the period with a share of 48%; followed by development sites / land at 33%. What was notable was the significant improvement in investments in the retail sector, which accounted for 13% of the total inflows in H1 2022 compared with 1% in the entire 2021. Metros continued to account for a bulk of investments; office, retail and development sites remained investment drivers. 

  • Retail sector would emerge as a strong focus point in the times to come. This is owing to the improving consumer sentiments that have led to a strong bounce back in terms of consumer mobility and retailer leasing in H1 2022
  • REITs could emerge as a stronger investment medium owing to portfolio expansion and launch of new REITs across office, I&L and retail assets.  Some of the factors that are aiding this trend are an enabling ecosystem created by the central government, increased participation in the equity markets, and growing financialization of assets.
  • Investment activity in land / development sites is expected to hold strong, with the residential sector accounting for a major portion of these capital inflows. In H1 2022 alone, nearly 700 acres of land across various asset classes were acquired for over USD 1.1 billion.
  • AIFs are likely to remain a major source of lending to the commercial real estate sector, owing to increased dependence on this medium of fund raising. In addition, due to rationalization and tightening of regulatory norms by the RBI for better oversight and higher transparency and risk mitigation, some mid-to-large sized NBFCs / HFCs have reduced their loan book exposure to CRE.

Top trends expected to shape 2022

  • Sustainability and ESG practices to emerge as stronger themes in investment strategies, not just in 2022, but also in the long term. This is owing to serious decarbonization efforts outlined by both developed and developing economies, including India. 
  • Globally, central banks have been raising key policy rates to tame inflation. In such a scenario, return expectations would rise as the cost of capital goes up. With the demand side remaining strong, we foresee a possible appreciation in both rental and capital values for income-generating assets, thereby ensuring that cap rates remain range-bound. 
  • Interest in PropTech firms and RE ancillary companies is anticipated to increase amidst a boom in the residential sector and revival in office and retail sectors. During H1 2022, several small-sized deals have been reported in this space. The growing adoption of artificial intelligence & machine learning, virtual & augmented reality and blockchain has opened up new opportunities for startups in the PropTech space. We expect the trend to continue owing to the aforementioned factors and growing interest in ‘as a service’ CRE solutions. 

Flexible Spaces

In H1 2022, flexible space operators accounted for over 6 million sq. ft. of office leasing activity in India. The need for agility is becoming far greater than ever before, as workforce behaviors have been transformed during the pandemic and likely would never return to pre-pandemic norms. As occupiers plan real estate portfolios amid such uncertainty, the inclusion of flexible spaces in these strategies is becoming ever more important. Therefore, companies that continue to adopt flexible spaces would be better positioned to reduce CapEx, avoid upfront fit-out costs, manage headcount volatility and implement hybrid working arrangements. As a result, we expect the flex stock in India to touch 80 million sq. ft. by the end of 2025.

Top trends expected to shape 2022

  • Product innovation and customized offerings by flexible space operators growing – ranges from location-specific portfolios to premium service offerings using advanced technologies with a focus on ‘experience’
  • Advent of next-generation flexible space designs that provide the right mix of private and open space to meet occupier needs.
  • Popularity of on-demand and subscription-based membership models to grow

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