BENGALURU : If India is facing its worst ever residential market crisis, the housing market in US and UK are facing similar challenges, a decade after the global financial crisis. The only silver lining seems to be commercial real estate, including office and logistics, which has performed against all odds. In an interview, Alistair Elliott, group chairman at global property advisory Knight Frank spoke about the real estate cycles, the office market boom and why the co-working space will only grow further. Edited excerpts:

India is seeing a commercial real estate boom, particularly in office space. How does it compare to other global markets?

Globally, the office market has been consistent and holding up really well despite various adversities, and the second would be logistics. India is experiencing what many other economies are experiencing. But the number of big cities in India and the scale of activity would be difficult to match anywhere, possibly only China. Even if we take the Bengaluru and Hyderabad office markets, each of them has the same scale as London. If we leave out London in UK, none of the other regional markets have this kind of scale of activity. In India, the office sector is driven by the growing technology or IT sector and a well-educated, competitively priced labour force.

Given the WeWork fiasco, how would the co-working sector play out going forward?

Whatever comes out of the WeWork transition, I don’t think anyone should write off WeWork and what they have taught the real estate industry, which is a reminder that there is a growing market for flexible workspaces. The co-working environment in all its shapes and sizes will grow in its scale. People now see office as a service and realize that there is much more value that they can get out of their office environment. At the core of the co-working business model, are two things – flexibility and services. The co-working business is here to stay and will only grow.

How do you evaluate the current real estate slowdown in India?

The one thing that we have to keep reminding ourselves about India is that it is a relatively immature market, compared to many markets across the world. But like every market that goes through cycles, people build in response to a certain market, the economy changes and adjustments have to be made. After many years of significant growth, the Indian market, particularly residential, is going through a transformation. The government is trying to help the affordable sector and get more traction. I suspect that the Indian market will work itself out over the next year or two and get back to some sort of normalcy. The real estate market is cyclical and we are going through a particular cycle.

India launched its first real estate investment trust or REIT this year. Does that change the way it is perceived as a property market?

Fundamentally, a REIT does two things. It gives credibility and creates a sense of maturity in the market. Operating within a REIT structure gives the market and its operators credibility and it is an acknowledgement that real estate in India has reached the next level. It shows the maturing of the market and gives the platform of investment within the country a new dimension going forward.

How has logistics and warehousing emerged as a sought after sector for investors globally?

Logistics used to be a poor cousin to retail and office earlier. Now, it’s on par and is seen as a credible and significant real estate alternative and prospect. We predict that with e-tailing continuing to grow in the foreseeable future, so the logistics environment will develop with it. Other than the various innovative products that are emerging out of e-tailing and logistics, there is also a developing case for multi-level distribution centres. In UK, logistics facilities are large and are further away from big cities. But importantly, there needs to be the right infrastructure to support logistics facilities.

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