Real Estate 2020 Review (Retail, Logistics, Cold Storage)

Excerpts from Real Estate 2020 review by CBRE and outlook 2021 by Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE.

While 2020 has been an unprecedented year globally, it has been able to create certain unique opportunities for the real estate sector that are likely to usher in a new era of innovation and digital transformation going forward. The COVID-19 pandemic has necessitated recalibration at a systemic and individual level. The real estate sector has not remained untouched from this recalibration but has shown remarkable resilience in the face of the pandemic. As we continue to learn to live in this COVID era, the year 2021 would require us to reimagine the way we have operated so far.

Below is a lowdown of how the real estate story unfolded in 2020:

Retail

 The growth of the Indian retail sector has been marked by rapid evolution in consumer behavior and growing integration of online and offline retail formats over the past few years. Discussion around the transformation of the retail sector has intensified in recent years as the industry adopts new technologies and approaches to fulfill consumer demand. The COVID-19 pandemic has accelerated many of these trends, with e-retail quickly progressing from being a regular habit for a minority of consumers to becoming a new norm of shopping behavior.The quarterly growth in retail space take was up by 79% from Q2 2020– Q3 2020.

Going forward, upmarket and niche grocery stores are likely to expand as Indians become more health-conscious and dine at home more frequently. Within F&B, fast-food players and coffee shops would continue to expand cautiously, with rationalized spaces and a robust home -delivery model. Touchless tech would also be a key trend in this space as retailers increasingly digitize merchandising and transacting mechanisms. The role of brick-and-mortar stores would evolve from just being a point of sale ; rather they would be expected to also serve as platforms to engage consumers and amplify brands. This might require a thorough re-evaluation of the location, design and operation model of retail properties. Within retail stores, CBRE also foresees a change in space densities of fitting rooms, product testing zones, pick-up counters and stockrooms. This changing nature of the retail store is likely to spur retailers to diversify their store formats and networks. CBRE expects to see a higher number of stores with unique features and product mix – all of which would continue to operate under a cohesive brand culture.

Logistics

 India’s Industrial & Logistics (I&L) RE sector has witnessed a transformation after 2017 in terms of the quality of assets, mode of operations and type of investments. Despite the COVID-19 pandemic affecting leasing activity, it has shown remarkable resilience during the COVID-19 pandemic. In 9M 2020, 3PL firms and e-commerce operators accounted for more than half of the leasing activity, followed by engineering & manufacturing firms. Hyperlocal delivery gained steam during the pandemic as e-commerce players began sourcing their deliveries from neighborhood stores to meet customer demand. The quarterly growth in warehousing space take was up by 105% from Q2 2020 – Q3 2020, with increase in absorption of space from 2.2 million sq. ft in Q2 2020 to 4.5 million sq. ft in Q3 2020.

The coming year is likely to see a continuation of this trend as demographic groups that previously displayed resistance towards online shopping have displayed acceptance due to its recently realized convenience and health safety. As a result, maintaining higher stock levels is likely to become a norm which, in the future, is expected to generate higher I&L demand from e-commerce players and in turn, 3PL firms. Another outcome of the pandemic on the Indian I&L sector has been the diversification of the supply chain, given the disruption caused by the pandemic in both supply and demand. As a result, occupiers are now adapting a modern, networked supply chain ecosystem that lays equal emphasis on resilience, near-shoring capability, sustainability and agility, thereby ensuring timely and transparent data flow among stakeholders. This digitization is also moving towards warehousing facilities where, going forward, the use of AI, IoT and Big Data would result in the creation of smarter warehouses that would significantly improve supply chain efficiencies.

 Cold Storage (CS): Following the COVID-19 outbreak, the demand for CS facilities is now being further fueled by huge omni-channel distribution of Food & Grocery (F&G) across tier I and II cities in the country. Currently, the overall cold storage (CS) capacity in India stands at about 37-39 million tonnes. CBRE expects the overall CS real estate stock to rise to 1,400 -1,500 million sq. ft. and the overall CS capacity is expected to reach 70 – 75 million tonnes by 2023.

(Representational image used)

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