Indian companies’ real estate sentiment in the last quarter of 2023 (October to December) was the highest since the second quarter of 2022, said a report, potentially signalling more deals in the sector.
Sentiment was 34.28 from October to December, or 2.45 per cent higher than in the third quarter of 2023. In the second quarter of 2022, it stood at 36.44. Knight Frank's ‘Global Corporate Real Estate Sentiment Index’ said that seven out of the 12 indicators used to measure sentiment from October to December 2023 improved compared to the previous one.
Corporate real estate refers to properties held or used by a company for operations. Such real estate typically includes a corporate headquarters along with several branch offices. It often comprises manufacturing and retail sites.
The index uses three sub-indices to measure growth, portfolio, and workplace sentiment. Two of the sub-indices (portfolio and workplace) witnessed improved sentiment in the fourth quarter of 2023. The growth sub-index saw a marginal decline quarter-on-quarter.
The sentiment in growth dynamics decreased due to two factors. Firstly, sentiment related to headcount growth in companies declined. Secondly, sentiment about companies' capital expenditure fell too.
"The third quarter of 2023 saw a significant rally in sentiment around future capital expenditure growth," said the report. "In the fourth quarter, half of the gains made were lost with the indicator now marginally negative at 2.91 points. This may act as a restraint on activities at the workplace and portfolio level if it continues."
In workplace dynamics, there is a growing focus on "driving densification, increasing productive utilisation, and delivering both “me” and “we space".
In the portfolio sub-index, companies are concentrating on relocating core facilities. "Occupiers are actively relocating core functions in response to growing physical and functional obsolescence," said the report. Additionally, there is a heightened emphasis on sustainability, with efforts to secure "green buildings" during replication where feasible.
