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1、INDIAREAL ESTATEOffice Myths DebunkedCBRE RESEARCHOctober 2023INTELLIGENT INVESTMENT041418283541Strategic investment and development approachResilient and diversified office leasingEfficiency-driven decision-making by corporatesInnovative approach to hybrid working Sustainability high on stakeholder
2、s agendaSummaryContents3CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentDuring H1 2023,the sector witnessed sustained activity levels despite the aforementioned challenges.In the short to medium term,CBRE expects occupiers to prioritize formulating comprehensive hybrid work pol
3、icies,exercise prudence in expanding their real estate portfolios and facilitate workplace transformation.Developers,on the other hand,are expected to future proof their assets,enhance employee engagement and expedite the implementation of ESG initiatives and offerings.As the office sector continues
4、 to adapt in the current landscape,it is crucial to demystify certain perceptions surrounding key trends anticipated in the short to medium term.This report seeks to provide clarity on these trends.Driven by pent-up demand and accelerated occupier returnto-office(RTO)plans,the officesector in India
5、experienced a remarkable resurgence in 2022,from pandemic-related lows.This resurgence,following the prioryears resilience,was influenced by emerging macroeconomic and geopolitical challenges,which are anticipated to persist into 2023.ExecutiveSummary2023 CBRE,INC.CBRE RESEARCHOffice Myths DebunkedI
6、ntelligent Investment4Strategic Investment and Development Approach4Strategic Investment andDevelopment ApproachPost COVID-19,a sense of caution prevails amongst real estate investors,who are deterred from investing in offices due to the rising appetite for hybrid working and a subdued global macro-
7、economic context.Myth#015CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentThe office sector has been a major draw for investors,especially foreign institutional players,attracting over USD 14 billion in capital flows between 2018 and H1 2023.The sector accounted for over 40%of t
8、he total inflows during this period.Additionally,three major real estate investment trusts(REITs)were listed since 2019,and more are in the pipeline.This reflects growing confidence of the investor community on the resilience of Indias office real estate market.They continue to explore opportunities
9、 both from an expansion and diversification perspective.REalityPost COVID-19,a sense of caution prevails amongst real estate investors,who are deterred from investing in offices due to the rising appetite for hybrid working and a subdued global macro-economic context.Myth#01Strategic Investment andD
10、evelopment Approach6CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment54%35%51%30%35%47%0%10%20%30%40%50%60%00212022H1 2023Share of ofice(%)(USD Bn)OficeOther sectorsShare of oficeSource:Indian Real Estate:Betting on a Capital Future,April 2023Figure 1.1:Sha
11、re of office sector in overall investmentsFigure 1.2:Share of office sector investments across major cities(2018-H1 2023)Figure 1.3:Cumulative share of investments across sectors(2018-H1 2023)11%26%26%8%7%3%19%Delhi-NCRMumbaiBangaloreChennaiHyderabadPuneKolkataOthers*Others include markets beyond to
12、p seven cities and investments spread across multiple cities(both tier-I or/and tier-II)Source:Indian Real Estate:Betting on a Capital Future,April 202341%38%7%5%3%3%1%2%OficeSiteRetailI&LResidentialHotelMixed-useOthersSource:Indian Real Estate:Betting on a Capital Future,April 2023Source:CBRE Resea
13、rch,Q3 2023REalityPost COVID-19,a sense of caution prevails amongst real estate investors,who are deterred from investing in offices due to the rising appetite for hybrid working and a subdued global macro-economic context.Myth#01Strategic Investment andDevelopment ApproachSource:CBRE Research,Q3 20
14、237CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentNote:The trend for transacted rentals may be in line with or diverge from quoted rentals for different assets depending on various factors such as asset quality,location,accessibility,age of the asset,space availability,etc.The
15、 significant growth in SBD Kharadi is primarily due to one specific asset quoting a higher average rental due to its prominent location.Figure 1.4:Yearly rental growth across select micro-marketsDelhi-NCRMumbaiPune-10%-5%0%5%10%15%20%25%30%DLFCybercity(IT)NH-8BeforeRajivChowk(Non IT)New CBD-BKC(Non
16、IT)WesternSuburbs 1(Non IT)SBD East(IT)SBD-Kharadi(IT)Growth rate(%)BangaloreHyderabadChennai-8%-6%-4%-2%0%2%4%6%8%10%ORR(NonSEZ)PBD-W(NonSEZ)ITCorridor I(IT)ITCorridorII(IT)OMR I(IT)Of CBD(Non IT)Growth rate(%)2020(YoY)2021(YoY)2022(YoY)H1 2023(HoH)Propelled by the strong demand momentum,we have se
17、en rental growth across key micro markets across cities in 2022 and some of it has continued in H1 2023 as well.Capital deployments by investors is likely to gain momentum as rental movement gains traction in select micro markets influenced by occupiers flight-to-quality approach.8CBRE RESEARCH2023
18、CBRE,INC.Office Myths DebunkedIntelligent InvestmentInstitutional investors continue to prefer core and core plus investment strategies,with nearly two-third of their total capital deployment from 2018-2022 being done through these routes.Meanwhile,developers have predominantly been pumping money th
19、rough the opportunistic route.On a cumulative basis,they have deployed nearly USD 7.8 billion during the same time period through this strategy,which translates into roughly 75%of their total funds committed.Office sector has ready investible stock and hence presents multiple opportunities for devel
20、opers and institutional investors across the four strategies.REalityPost COVID-19,a sense of caution prevails amongst real estate investors,who are deterred from investing in offices due to the rising appetite for hybrid working and a subdued global macro-economic context.Myth#01Strategic Investment
21、 andDevelopment ApproachFigure 1.5:Capital deployment across investment strategies across sectorsFigure 1.6:Preferred sectoral betsSource:CBRE Research,Q3 2023I&LResidentialMixed-useOficeRetailOficeRetailOficeRetailOficeI&LData CentresCoreCore-plusValue-addOpportunisticStrategyPreferred Sectors2018C
22、oreCore-plusValue-addOpportunistic2002276543210USD billionSource:Real Capital Analytics,VCCircle,CBRE Research,Q3 2023Source:Real Capital Analytics,VCCircle,CBRE Research,Q3 20239CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentUSD 6.1 bnCanadaUSD 7.2 bnUSAUSD 0.7 bnU
23、KUSD 0.2 bnGermanyUSD 0.8 bnUAEUSD 14.6 bnIndiaUSD 0.4 bnHong Kong+ChinaUSD 0.5 bnJapanUSD 3.4 bnSingaporeIndia continues to be a top investment destination in Asia Pacific for North American&European investors,as they seek long-term diversification and healthy rental returns.Investment in India by
24、western buyers increased by a strong 80%year-on-year to touch USD 2.8 billion*in 2022,making it the only market in the entire APAC region to witness annual growth in capital deployment.REalityMyth#01Strategic Investment andDevelopment ApproachFigure 1.7:Capital inflows in India from key countries(20
25、18 H1 2023)Source:CBRE Research,Q3 2023Source:*CBRE 2022 Asia Pacific Real Estate Capital Flows,May 2023Post COVID-19,a sense of caution prevails amongst real estate investors,who are deterred from investing in offices due to the rising appetite for hybrid working and a subdued global macro-economic
26、 context.Strategic Investment andDevelopment ApproachDisruptions resulting from the pandemic and current macro-economic climate is also impacting developer interest,thereby complicating future development plans in the sector.Myth#02Office Myths Debunked10CBRE RESEARCH2023 CBRE,INC.Intelligent Invest
27、ment11CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentThe average annual office supply increased by a robust 17%and the average building size increased by a significant 18%over the three-year period from 2020 to 2022(Refer to figure 1.8).This growth is expected to further accel
28、erate by 15-18%during the next three-year period from 2023 to 2025,supported by strengthening occupier demand and developers expansion plans.REalityDisruptions resulting from the pandemic and current macro-economic climate is also impacting developer interest,thereby complicating future development
29、plans in the sector.Myth#02Strategic Investment andDevelopment ApproachFigure 1.8:Trends in average annual office supply and average building size4740550.40.30.5Average Annual Supply(mn sq.ft.)Average Development Size(mn sq.ft.)-222023-2517%18%16-18%15-17%Source:CBRE Research,Q3 2023CBRE
30、expects office supply completions to exceed 165 mn sq.ft.over the 2023-2025 period,significantly higher than the 142 mn sq.ft.recorded from 2020-2022.This strong growth reflects the positive outlook of the developer community.Bangalore and Hyderabad would continue to dominate completions,accounting
31、for nearly half of the overall supply during 2023-25 while Delhi-NCR,Pune,Chennai,Mumbai,and Kolkata would follow(refer to figure 1.9).Certain micro-markets within these cities could avoid structural supply overhang provided the pipeline is planned effectively basis oncoming occupier demand.A steady
32、 supply of about 120 mn sq.ft.of office space is also expected over 2026-2027.Bangalore29%Hyderabad20%Delhi-NCR17%Pune12%Chennai11%Mumbai9%Kolkata2%New Ofice Development Completions(2023-25)ORR,NBDIT Corridor II,Extended IT CorridorExpressway,Ext.Golf Course RoadPBD NE,SBD NWOMR Zone 2,MP RoadNMBD,E
33、XBDPBD,SBDTop Micro markets dominating supply12CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityMyth#02Strategic Investment andDevelopment ApproachFigure 1.9:Upcoming supply in top seven cities(2023-2025)Source:CBRE Research,Q3 2023Note:The percentages below each city rep
34、resent its share in supply over the 2023-2025 time periodDisruptions resulting from the pandemic and current macro-economic climate is also impacting developer interest,thereby complicating future development plans in the sector.13CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investmen
35、tIn response to occupiers cautiousness about lease renewals,flight-to-quality relocations,and adoption of hybrid working trends,developers are increasingly focused on creating unique and engaging office experiences that would attract and retain talent.This includes providing a multitude of offerings
36、 such as interconnected and collaborative workspaces,enhanced amenities,and stylized work settings that foster a sense of community and well-being.Developers are also placing a strong emphasis on sustainability,with nearly three-quarters of the newly completed developments in H1 2023 being green-cer
37、tified,either by LEED or IGBC.REalityMyth#02Strategic Investment andDevelopment ApproachFigure 2.0:Few initiatives by developers to support occupiers in improving end-user experience*Refurbishment of lobby areasEnhancing creche&play areas,getting leading operators on boardAdding new/enhancing existi
38、ng F&B amenitiesAdopting customized fragrance solutions in the buildingCustomer relationship managementOffering a premium members loungeInstalling turnstiles with facial recognitionProviding/enhancing open areas wherever possibleImproving parking spaces;parking automation using RFIDImplementation of
39、 building appsUpgrading amenities blocksAdding auditoriumsSource:CBRE Research,Q3 2023;*CBRE-Returning to an office designed for the future:Essential workplace design trends to suit a hybrid workforceDisruptions resulting from the pandemic and current macro-economic climate is also impacting develop
40、er interest,thereby complicating future development plans in the sector.2023 CBRE,INC.CBRE RESEARCHOffice Myths DebunkedIntelligent Investment14Resilient and Diversified Office Leasing15CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentResilient and Diversified Office LeasingIncr
41、eased focus on cost avoidance&reduced profitability in the technology sector is having a significant impact on office leasing in India.Myth#0316CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentDespite the cautious economic environment,IT spending in India is expected to remain r
42、esilient in 2023,with corporates focusing on improving employee productivity,customer experience,and overall optimization.This is likely to drive demand for office space from the technology sector,and CBRE expects leasing activity to remain strong in the long term.While the technology sector would c
43、ontinue to be strong going forward,we are starting to witness increased demand from other key sectors such as BFSI,flexible spaces and E&M as shown in the figure below.The BFSI sector has witnessed healthy space take-up in the recent past,mainly led by global and domestic banks as well as financial
44、institutions that are expanding their presence in the country as more employees return to the office.Flexible workspaces are in high demand as organizations adapt to hybrid work and seek long-term value beyond short-term cost savings.The E&M sector has seen a fair amount of absorption mainly driven
45、by the global supply chain realignment,the China+1 strategy and the governments policy push for foreign manufacturers to setup their operations in India.REalityPre-COVIDBFSIFlexible spaceE&M2002220222022H1 2023H1 2023H1 202311%14%8%12%15%12%20%20%14%Post-COVIDSource:Media articles;CBRE Re
46、search,Q3 2023Increased focus on cost avoidance&reduced profitability in the technology sector is having a significant impact on office leasing in India.Myth#03Strategic Investment andDevelopment ApproachIT spending in India in 2023USD 112+bnFigure 2.1:Diversification in demand coming from different
47、 industry sectorsSource:CBRE Research,Q3 2023;BFSI-Banking,financial services,insurance;E&M-Engineering&manufacturing17CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityIncreased focus on cost avoidance&reduced profitability in the technology sector is having a significant
48、 impact on office leasing in India.Myth#03Strategic Investment andDevelopment ApproachFigure 2.2:Projected growth across key industry sectors(anticipated to drive office sector demand)TechBFSIStart-upManufacturingGCCE-commerceLife-sciencesConstructionIndias Technology Sector1.8X to USD 350 bn by 202
49、5i USD 500 bn by 2030The GCC Market 1.7X to USD 60 bn by 2025iiUSD 110 bn by 2030The Fintech Market 3X to USD 350 bn by 2025iiiManufacturing Output3.3X to USD 1.4 tn by 2031ivE-commerce sector6X to USD 380 bn by 2024viNumber of Unicorn Start-Ups 2.2X to 200+by 2025viiPharmaceuticals1.5X to USD 65 bn
50、 by 2024viiiReal Estate&Construction Market5X to USD 1 trillion by 2030ixSource:CBRE Research,Q2 2023;i NASSCOM,February 2021;ii EY article,June 2023;iii IBEF banking report,April 2023;iv Morgan Stanley report,October 2022;v Oxford Economics,26 June 2023;vi Bain&Company,June 2023;vii-NASSCOM;viii Ec
51、onomic survey 2022-23;ix IBEF RE report,February 2023;x Invest India,June 2023;*Major segments under fintech include payments,digital lending,insur-tech,wealth-tech;*National Manufacturing Policy18CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment2023 CBRE,INC.CBRE RESEARCHOffice
52、 Myths DebunkedIntelligent Investment18Efficiency-driven Decision-making By Corporates19CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentEfficiency-driven Decision-making By CorporatesIn light of the current economic uncertainty,several occupiers are opting to downsize their off
53、ice portfolios in India.Myth#0420CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityIn light of the current economic uncertainty,several occupiers are opting to downsize their office portfolios in India.Myth#04Efficiency-driven Decision-making By CorporatesIndia is a well-e
54、stablished services-oriented economy and is poised to continue to grow in this sector in the coming years.This growth will be driven by the contribution of high-value-added services over the next few years,especially in sectors such as technology,manufacturing and hospitality.Figure 3.1:Tertiary ind
55、ustry growth and as a%of GDP in 2027Figure 3.2:Growth across industry sectors30405060708090100-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%IndiaIndonesiaPhilippinesVietnamMainland ChinaMalaysiaThailandHong Kong SARAustraliaSingaporeNew ZealandTaiwanSouth KoreaJapanUnited KingdomFranceUnited Sta
56、tesNetherlandsGermany%of GDP in 20275-years CAGR-2027%of GDP in 2027Europe and AmericasManufacturingServicesWorkforceShare to GDPExportsIn technology services sector15.6%21%in 2022by 2031The long-term demand drivers for the office sector,such as the attractive and cost-effective source
57、of abundant high-skilled talent,digital transformation,large demographic base,energy transformation are expected to boost the services and manufacturing sector.USD 178 bnUSD 527 bnin 2022by 20315.1 bn12.2 bnin 2022by 2031Source:CBREs Why Asia Pacific offices are different and now is the time to inve
58、st,June 2023;CBRE Research,Q3 2023Source:Why this is Indias Decade-Morgan Stanley Report,October 2022;CBRE Research,Q3 2023 OctoberSource:CBRE Research,Q3 202321CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentIn light of the current economic uncertainty,several occupiers are op
59、ting to downsize their office portfolios in India.Myth#04Efficiency-driven Decision-making By CorporatesREalityThe IT industry has experienced significant growth due to the swift integration of digital transformation efforts and the rise of novel business prospects in areas such as Cloud Computing,A
60、rtificial Intelligence(AI),Cybersecurity,and other advanced technologies.020202120222023F2024F2025FOfice going employment(mn)Source:Oxford Economics;*Bangalore,Chennai,Hyderabad,Mumbai,Delhi,Kolkata;#Michael Page Salary Guide 2023;Additionally,the hiring activity in India has shown an upw
61、ard trajectory in 2022 with the overall number of jobs increasing by 23%Y-o-Y#in 2022.Annual office-going employment in the six major Indian cities*is expected to grow by 11%in 2023 as compared to 2019.Figure 3.3:Growth in office going employment22CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedInte
62、lligent InvestmentThese disruptions are likely to have a moderating impact on long-term demand for offices in India.Myth#05Efficiency-driven Decision-making By Corporates23CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityThese disruptions are likely to have a moderating i
63、mpact on long-term demand for offices in India.Myth#05Efficiency-driven Decision-making By CorporatesThe prolonged decision-making led by the current macroeconomic uncertainty might lead to cautiousness in absorption in the short-to medium-term.However the long-term drivers of office space demand en
64、dure as occupiers continue to lease larger office spaces.Figure 3.4:Average deal size Pre-COVID vs.Post-COVIDFigure 3.5:Long-term expectations of total portfolio size in India over the next two yearsLong-term drivers of corporate portfolio expansion in India31,10035,900Average deal size(sq.ft.)2017-
65、192020-22increase15%Favorable demographicsAvailability of high-quality office spacesHigh-skilled,cost-effective talent poolAttractive rentalsNote:Percentages may not total to 100 due to rounding.These results are limited to those respondents who chose to answer this question and may difer from indiv
66、idual companies on a case-by-case basis due to their scale,type and location of business operations.Significantly larger(30%)Moderately larger(10-30%)Minimally smaller(10%)Moderately smaller(10-30%)Minimally larger(30%)UnsurePost-COVID-19Pre-COVID-19%of respondentsUnsureSource:CBREs India Office Occ
67、upier Survey,June 2023;CBRE Research,Q3 2023Source:CBREs India Office Occupier Survey,June 2023;CBRE Research,Q3 2023Robust technology&start-up ecosystemsBeneficial government policies24CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityMyth#05Efficiency-driven Decision-mak
68、ing By CorporatesPost the pandemic,global firms were nudged to re-evaluate their business offerings to increase digitalization levels.In a bid to ensure business agility,improve efficiency and make their businesses resilient,a higher number of global corporates explored multi-functional GCCs across
69、the globe and in India.While Fortune 500 companies are deeply entrenched in India through their GCCs,small and mid-sized firms too started entering the Indian shores to enhance their offerings.Post the pandemic related disruptions in 2020,the year 2021 saw a renewed appetite from GCCs for office upt
70、ake.This spurt was not only driven by the pent-up demand from the previous year(2020)but also the need for firms to ramp up their deep technology interfaces faster than they had planned pre-pandemic.Moreover,the macro-economic challenges seen in several developed countries also necessitated high-eff
71、iciency low-cost solutions across sectors.Cementing the long-term intent of global corporates in India,GCCs are now leasing larger offices with the potential to scale up in the future.North American firms continue to be the mainstay of GCCs in India,with their share in overall leasing rising during
72、the pandemic.While a sizeable share of GCC office space take-up is dominated by firms belonging to sectors such as technology and BFSI(banking,financial services and insurance),off late we have also seen a significant expansion from engineering&manufacturing corporates.This is largely a consequence
73、of the supply chain diversification and the rise of China+1 manufacturing strategy that several global firms have started to adopt.Over the next few years,we anticipate greater demand from sectors such as life sciences,automobiles and aviation,as several firms from these sectors are expected to expa
74、nd their GCC operations in India.Figure 3.6:GCC leasing trends over the past few years-2022125016001.3 mn*1.66 mn#30-35%38-43%No.of operational GCCsGCC talent baseShare of GCC leasing to overall absorptionThese disruptions are likely to have a moderating impact on long-term demand for o
75、ffices in India.Source:*Nasscom estimates as of March 2020;#Nasscom estimates as of March 2023;CBRE Research,Q2 2023Source:Nasscom-Zinnov GCC 3.0 Spotlight On Digital Partnerships,New Delivery Models&Future Skills,May 2019;#Nasscom GCC 4.0:India Redefining The Globalization Footprint,June 2023;CBRE
76、Research,Q3 2023;25CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentFlexible spaces serve only as short-term cost-effective solutions for occupiers.Myth#06Efficiency-driven Decision-making By Corporates26CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREali
77、tyFlexible spaces serve only as short-term cost-effective solutions for occupiers.Myth#06Efficiency-driven Decision-making By CorporatesThe need to support hybrid and distributed working has replaced CapEx savings as the primary demand driver for flexible spaces.Support hybrid workingManage volatili
78、ty in demandShort-term space solution for temporary dispersed workforceProvide a network of locations to support mobile workforce accessOffer employees more choice over where to workOffer employees meeting and collaboration space on demandOffer access to desk pass or open access subscriptions member
79、ships to employeesSolve for uncertain demandSwing space while leased space is under constructionTest alternate workspace or occupancy models and designsEnter a new market(s)Access new services or amenitiesCompanies that continue to adopt flexible spaces would be better positioned to embrace hybrid w
80、orking arrangements,support their employees and remain agile in their real estate strategies.Apart from the reduced capital expenditure,below are some key reasons for using flexible spaces in India.Source:CBREs The Future is Flexible,May 2023;CBRE Research,Q3 2023Figure 3.7:Key reasons for occupiers
81、 to consider flexible spaces27CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityFlexible spaces serve only as short-term cost-effective solutions for occupiers.Myth#06Efficiency-driven Decision-making By CorporatesOccupiers of all sizes are increasing the percentage of fle
82、xible spaces in their real estate portfolio for several reasons.Demand from medium-to large-sized companies would particularly help the flexible operators scale up for the future.Figure 3.8:Share of flexible workspace leasing to overall gross absorption9%14%15%19%202020212022H1 2023%share of flex le
83、asing to overall gross absorptionSource:CBRE Research,Q3 202328CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment2023 CBRE,INC.CBRE RESEARCHOffice Myths DebunkedIntelligent Investment28Innovative Approach to Hybrid Working29CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntellig
84、ent InvestmentPrevalence of hybrid working,albeit in a select few sectors,would have a detrimental impact on demand for offices in India.Myth#07Innovative Approach To Hybrid Working30CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment3/4th50%Of the respondents currently have a com
85、mute not more than 30 minutesRespondents who preferred a one-way travel time of not more than 30 minutesREalitySource:CBRE Research,Q3 2023The commute time to work will be an important factor for employees when choosing their next job or residence.As a result,occupiers will need to take this into ac
86、count when selecting office locations and provide amenities such as decentralized offices,spaces near public transportation hubs,and transportation services to make the commute easier for their employees.Figure 4.1:Cultural norms with regards to workplace policies that organizations aspire for in a
87、steady state in IndiaContrary to the myth,about 40%of the respondents in CBREs India Office Occupier Survey,June 2023 chose fully office based preference as compared to just 18%in a similar survey conducted in July 2022 indicating an office-first approach hybrid working.Note:Percentages may not tota
88、l to 100 due to rounding.These results are limited to those respondents who chose to answer this question and may differ from individual companies on a case-by-case basis due to their scale,type and location of business operations.Source:CBREs India Office Occupier Survey,June 2023;CBRE Research,Q3
89、2023Source:Voices from India:How will people work in the future,February 2023;CBRE Research,Q3 2023Myth#07Innovative Approach To Hybrid WorkingAt least 3 days per week in the ofice40%30%26%4%0%0%18%35%38%6%0%3%15%34%33%11%8%0%Fully oficeMostly at the ofice(four or five days perweek)Equal mix(three d
90、ays per week)Mostly remote(four or five days per week)Fully remoteUnsure%of respondentsIndia Occupier Survey,June 2023India Occupier Survey,Jul 2022India Employee Survey(LWS),Feb 2023Prevalence of hybrid working,albeit in a select few sectors,would have a detrimental impact on demand for offices in
91、India.31CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalitySource:CBRE Research,Q3 2023Myth#07Innovative Approach To Hybrid WorkingPrevalence of hybrid working,albeit in a select few sectors,would have a detrimental impact on demand for offices in India.80%74%57%78%77%60%69
92、%82%60%My personal productivityhas improved My teams productivity hasimprovedI want to reduce the overallamount of time I spendworkingOfice employeesHybrid employeesRemote employees83%76%74%68%71%69%69%64%55%My relationship withcolleagues has improvedI feel connected to the workof my immediate teamI
93、 feel connected to the workof other teamsOfice employeesHybrid employeesRemote employees68%47%69%53%66%70%My level of job satisfaction has increasedThe stress I feel while working hasincreasedOfice employeesHybrid employeesRemote employees68%48%79%52%75%51%78%49%62%59%69%64%The trust I have in mycur
94、rent employer hasstrengthenedI want to change mycareer pattern(part-time or portfolioworking etc.)I pay more attentionto the values andethics of my employerI am more likely toleave my current job ifI became dissatisfiedwith my work situationOfice employeesHybrid employeesRemote employeesProductivity
95、WellbeingConnectednessAttachment to employerFigure 4.2:Improving work-related aspectsOccupiers indicated a growing preference for office-first hybrid-working strategies due to perceived benefits on productivity,wellbeing,connectedness and trust in the employer.Source:Voices from India:How will peopl
96、e work in the future,February 2023;CBRE Research,Q3 202332CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityPrevalence of hybrid working,albeit in a select few sectors,would have a detrimental impact on demand for offices in India.Myth#07Innovative Approach To Hybrid Worki
97、ngWhile hybrid working continues to be prevalent with only a section of the staff likely to be given this option,occupiers would be more assertive in bringing their employees back to the office.As new hires face challenges with onboarding,collaboration with co-workers,culture and visibility,occupier
98、s may assign them to a fixed physical office location.Remote hiring is likely to be focused on combination of WFH and satellite offices.Figure 4.3:Office space absorption from 2020 to 2022Office space absorption rebounded in 2021 and 2022,growing by 15%and 41%Y-o-Y,respectively.Hybrid working polici
99、es are likely to vary for each organization pertinent to their global guidelines,the type of business,existing real estate footprint and the number of staff employed.Source:CBRE Research,Q3 20233542022(mn sq.ft.)15%increase41%increase33CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntel
100、ligent InvestmentUtilization rates across offices would take longer to improve given the challenge in bringing staff back to offices.Myth#08Innovative Approach To Hybrid Working34CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalitySource:CBRE Research,Q3 2023;#Moonlighting r
101、efers to the practice of working a second job or multiple secondary jobs in addition to ones primary full-time job,especially without informing the primary employer;#News articles and CBREs interactions with occupiersUtilization rates across offices would take longer to improve given the challenge i
102、n bringing staff back to offices.Myth#08Innovative Approach To Hybrid WorkingWFH fatigue,attrition and moonlighting#led occupiers to step up their RTO plans,as a result of which office occupancies rose gradually,particularly after H2 2022.#CBREs India Office Occupier Survey,June 2023 substantiated t
103、hese trends by revealing that a utilization rate of more than 50%was witnessed by about half of the respondents in Q1 2023.Notably,nearly one-third of the respondents reported a utilization rate of more than 75%.The increase in utilization rates was observed across all sectors and domiciles.More tha
104、n 50%utilization rate%of respondents52%Q1 202321%Dec 20210%27%21%21%31%20%47%12%10%11%No one has access 75%of respondentsAverage utilization rateIndia Occupier Survey,June 2023India Occupier Survey,Dec 2021*Figure 4.4:Average utilization rate in India over the past three months(number of seats used
105、vs maximum capacity allowed)Note:Not applicable responses have been excluded from the analysis.These results are limited to those respondents who chose to answer this question and may differ from individual companies on a case-by-case basis due to their scale,type and location of business operations
106、.Source:CBREs India Office Occupier Survey,June 2023;CBRE Research,Q3 202335CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment2023 CBRE,INC.CBRE RESEARCHOffice Myths DebunkedIntelligent Investment35Sustainability high on stakeholders agenda36CBRE RESEARCH2023 CBRE,INC.Office Myth
107、s DebunkedIntelligent InvestmentCorporate ESG considerations might be re-prioritized amidst current cost containment approaches.Myth#09Sustainability high on stakeholders agenda37CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityCorporate ESG considerations might be re-pri
108、oritized amidst current cost containment approaches.Myth#09Quite the contrary,the current economic and geopolitical factors have intensified the global occupiers focus on ESG.Figure 5.1:Most important initiatives in organizational goalsFigure 5.2:Top challenges to ESG implementationReducinggreenhous
109、egas emissionsImprove employeehealth&well-beingReducingresourcewastagePoor availabilityof quality dataBenefits areunknown oruncertainCosts exceed benefits,making it dificultto justify actionSource:CBREs Strengthening Value Through ESG,February 2023;CBRE Research,Q3 2023Source:CBREs Strengthening Val
110、ue Through ESG,February 2023;CBRE Research,Q3 2023Source:CBRE Research,Q3 2023Source:CBREs Strengthening Value Through ESG,February 2023;CBRE Research,Q3 202367%of the respondents in CBREs global ESG survey in Feb 2023 indicated intensified focus on ESG initiatives in 2022.Figure 5.3:Economic and ge
111、opolitical factors influencing focus on ESG0%10%20%30%40%50%60%70%80%Imposition ofnew ESGdisclosurerequirementsInflation inenergy pricesIncreasedglobalgeopoliticaluncertaintyand tensionPost-pandemicsupplyshortages orbottlenecksRising globalinterest ratesAllInvestorOccupierIndicates percentage of res
112、ponsesSustainability high on stakeholders agenda38CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentREalityMyth40%38%35%33%30%28%Resource usage or waste reductionprogramConduct energy auditOccupy green-certified buildings inthe portfolioUse of renewable energyCarbon emissions red
113、uctionprogram or carbon neutralityImprove employee health and well-being through certified or compliantspaces83%73%65%63%63%60%58%Sustainability benchmarking of allassets togetherPreparation of BRSR(BusinessResponsibility and SustainabilityReport)Improve employee health and well-being through certif
114、ied orcompliant spacesUse of local suppliers or sustainableprocurementUpgrade older ofices/facilities forenergy eficiencyGlobal Real Estate SustainabilityBenchmark(GRESB)or any otherESG reportingUndertake environmental duediligence before site selection for anew premiseImplementedConsideringPlease n
115、ote all values in the charts above denote the percentage of respondents.Source:CBREs 2023 India Office Occupier Survey,June 2023;CBRE Research,Q2 2023Note:These results are limited to those respondents who chose to answer this question and may differ from individual companies on a case-by-case basis
116、 due to their scale,type and location of business operations.Figure 5.4:Various initiatives that have either been implemented and/or under consideration by occupiers#09Corporate ESG considerations might be re-prioritized amidst current cost containment approaches.Sustainability high on stakeholders
117、agenda39CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentGlobally,the real estate industry is confronting a significant obstacle:retrofitting our assets to lower global carbon emissions.Retrofitting is important from an energy conservation perspective and also from a resource st
118、andpoint.In India,about 155 mn sq.ft.of grade A office assets have the opportunity to undergo retrofitting.155 mn sq.ft.of Grade A office buildings have the opportunity to undergo retrofitting/upgradationGreen retrofitting measuresREalityMythESG initiatives present an opportunity for investors,landl
119、ords and occupiers to focus on value creation and mitigate risks.Much of this opportunity is centered around the management,retrofit and refurbishment of existing real estate assets.Occupiers are likely to consider flight-to-quality from older multi-tenanted buildings to next-generation green buildi
120、ngs.We anticipate nearly 100 mn sq.ft.of lease expiries from 2015-2017 by global and leading Indian firms who have also made net zero commitments.This provides an excellent opportunity for landlords to retrofit existing assets.MumbaiChennaiBangalorePuneHyderabadDelhi-NCR20%33%24%7%16%51%EnergyEficie
121、ncyWaterEficiencyGreenRoofingOptimisingindoorenvironmentBuildingautomationsystemsSource:CBRE Research,Q3 2023;The%refers to the share of 15+year-old assets in each citys Grade A office stock#09Corporate ESG considerations might be re-prioritized amidst current cost containment approaches.Figure 5.5:
122、Green retrofitting measuresSustainability high on stakeholders agenda40CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent InvestmentAnother aspect that corporates are also looking at to enhance workplace attractiveness is placemaking.It enhances the assets value through the creation of a su
123、rrounding“destination”which delivers a sense of wellbeing and community.Enabling the right sustainability elements would help enhance the employee experience.REalityMythFigure 5.6:Desirable factors for more frequent office visits by employeesSource:Voices from India:How will people work in the futur
124、e,February 2023;CBRE Research,Q3 2023Source:CBRE Research,Q3 202380%76%76%75%69%Health&WellnessTechnologySpace DesignLocationServices&AmenitiesOptimum indoor environmentThermal comfort&lightingEarmarking green open spaces#09Corporate ESG considerations might be re-prioritized amidst current cost con
125、tainment approaches.Sustainability high on stakeholders agendaSummary41CBRE RESEARCH2023 CBRE,INC.Office Myths DebunkedIntelligent Investment#01 MYTH#04 MYTH#07 MYTH#02 MYTH#05 MYTH#08 MYTH#03 MYTH#06 MYTH#09 MYTHPost COVID-19,a sense of caution prevails amongst real estate investors,who are deterre
126、d from investing in offices due to the rising appetite for hybrid working and a subdued global macro-economic context.On the contrary,significant capital flows into the office sector in India between 2018 and H1 2023,listing of three major REITs and strong rental growth across key micro-markets indi
127、cate the resilience of Indias office sector and investors intention to explore opportunities both from an expansion and diversification perspective.In light of the current economic uncertainty,several occupiers are opting to downsize their office portfolios in India.Indias services-oriented contribu
128、tion to the economy is poised to continue to grow from 2023 2027 and would be the highest when compared with key countries across the region.The long-term demand drivers for the office sector,such as the attractive and cost-effective source of abundant high-skilled talent,digital transformation and
129、energy transformation are expected to boost the services and manufacturing sector.Prevalence of hybrid working,albeit in a select few sectors,would have a detrimental impact on demand for offices in India.On the contrary,most corporates in CBREs recent occupier surveys are indicating an office-first
130、 approach to hybrid working due to perceived benefits on productivity,wellbeing,connectedness and trust in the employer.Hybrid working policies are likely to vary for each organization pertinent to their global guidelines,the type of business,existing real estate footprint and the number of staff em
131、ployed.Disruptions resulting from the pandemic and current macro-economic climate is also impacting developer interest,thereby complicating future development plans in the sector.In fact,the strong supply pipeline over 2023 2025 reflects the positive outlook of the developer community.And in respons
132、e to occupiers cautiousness about lease renewals,flight-to-quality relocations,and adoption of hybrid working trends,developers are increasingly focused on creating unique and engaging office experiences that would attract and retain talent.These disruptions are likely to have a moderating impact on
133、 long-term demand for offices in India.While occupiers continue to lease larger office spaces,their long-term expectations of total portfolio size in India over the next two years have improved as compared to the past 2-3 years.GCCs too,are leasing larger offices with the potential to scale up in th
134、e future,cementing the long-term intent of global corporates in India.Utilization rates across offices would take longer to improve given the challenge in bringing staff back to offices.Work-from-home fatigue,attrition and moonlighting led occupiers to step up their return-to-office plans,as a resul
135、t of which office occupancies rose gradually,particularly after H2 2022.Increased focus on cost avoidance&reduced profitability in the technology sector is having a significant impact on office leasing in India.While the technology sector would continue to be strong going forward,we are starting to
136、witness increased demand from other key sectors such as BFSI,flexible spaces and E&M.The projected growth across industry sectors over the next few years is anticipated to further diversify the office sector demand.Flexible spaces serve only as short-term cost-effective solutions for occupiers.The n
137、eed to support hybrid and distributed working has replaced CapEx savings as the primary demand driver for flexible spaces.Companies that continue to adopt flexible spaces would be better positioned to embrace hybrid working arrangements,support their employees and remain agile in their real estate s
138、trategies.Corporate ESG considerations might be reprioritized amidst current cost containment approaches.Quite the contrary,the current economic and geopolitical factors have intensified the global occupiers focus on ESG.These sustainability initiatives present an opportunity for investors,landlords
139、 and occupiers to focus on value creation and mitigate risks.ContactsResearchAbhinav JoshiHead of Research-India,Middle East&North Africa abhinav.joshicbre.co.inPradeep NairAssociate DSarath Chandra Praveen ChilukuriM Apoorva PSenior AGlobal ResearchRichard Barkham,Ph.D.,MRICSGlobal Chief Economist&
140、Head of RHenry Chin,Ph.D.Global Head of Investor Thought Leadership and Head of Research,APAC.hkJulie WhelanHead of Occupier Thought Leadership,GFollow UsBusiness LineRam ChandnaniManaging Director,Advisory&Transactions Servicesram.chandnanicbre.co.inVamshi KrishnaSenior Executive Director,Head Valu
141、ation and Advisory Services,India&South East Asiavamshi.krishnacbre.co.inSumit AroraAssociate Executive Director,Head-National Operations&Workplace Strategy,Consulting,Indiasumit.aroracbre.co.in Copyright 2023.All rights reserved.This report has been prepared in good faith,based on CBREs current ane
142、cdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject to significant uncertainties and contingencies,many of which are beyond CBREs control.In addition,many of CBREs views are
143、opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,and actual market conditions in the future may cause CBREs current views to later be incorrect.CBRE has no obligation to update its views her
144、ein if its opinions,projections,analyses or market circumstances later change.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securities.You should not purchase or sell securitiesof CBRE or any other
145、 companybased on the views herein.CBRE disclaims all liability for securities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of
146、 the accuracy,completeness,adequacy or your use of the information herein.Business Line ContactsAdvisory&TransactionsRam ChandnaniManaging Director,Advisory&Transactions Servicesram.chandnanicbre.co.inConsulting&ValuationRami KaushalManaging Director,Consulting&Valuations,India,Middle East&Africaram
147、i.kaushalcbre.co.in Global Workplace SolutionsRajesh PanditManaging Director,Global Workplace Solutions,India&Property Management,India,SE Asia,Middle East&North Africarajesh.panditcbre.co.inProject ManagementGurjot BhatiaManaging Director,Project Management,India,SE Asia,Middle East&Africagurjot.bh
148、atiacbre.co.in Capital MarketsGaurav KumarManaging Director&Co-Head,Capital Markets,Indiagaurav.kumarcbre.co.inCapital MarketsNikhil BhatiaManaging Director&Co-Head,Capital Markets,Indianikhil.bhatiacbre.co.inOperationsRajat GuptaManaging Director,Operations,I Copyright 2023.All rights reserved.This
149、 report has been prepared in good faith,based on CBREs current anecdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject to significant uncertainties and contingencies,many of w
150、hich are beyond CBREs control.In addition,many of CBREs views are opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,and actual market conditions in the future may cause CBREs current views to
151、 later be incorrect.CBRE has no obligation to update its views herein if its opinions,projections,analyses or market circumstances later change.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securit
152、ies.You should not purchase or sell securitiesof CBRE or any other companybased on the views herein.CBRE disclaims all liability for securities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of the accuracy,completeness,adequacy or your use of the information herein.