Exploring the top five infrastructure industry segments that India’s facility management industry should strategically target in the upcoming years.
Flexibility has become pivotal in occupier portfolio strategies. Organisations now want short- to long-term space solutions with the flexibility to scale up or down on demand, providing much-needed leeway for dynamic resource management.
In just five years, the footprint of flexible workspaces has expanded by nearly 400% to 53 million sq ft; this figure is likely to double over the next five years. The pandemic-induced confusion of work-from-home/office has settled into a hybrid model, reflected in the fact that the number of work seats taken up by businesses in FY23 is more than the FY21 and FY22 numbers combined.
The tech-dominated cities of Bengaluru, Hyderabad, Pune and Chennai today account for around 70% of flex footprint across the top seven cities; while the share of the tech sector – while still leading – has declined, flexibility has also become the mantra for the manufacturing, BFSI and consulting segments. In heartening news, Indian startups now lease more seats than all sectors other than tech; this upward trend can be expected to continue.
Smaller cities are flexing their shared workspace muscle too. In a recent survey, 26% of respondents with their current operations limited to Tier 1 cities indicated that they are willing to explore Tier 2 cities for their medium- to long-term expansion plans. This is where the story of workspaces will pan out most.
In FY23, gross leasing of all workspaces is likely to be at 40-45 million sq ft – 15-20% higher than predicted in early 2023. Hybrid work may be the new normal but working out of an office for at least a part of the week remains the norm.
While REITs have been driven by office demand, one can expect to see more REITs being introduced across other asset classes such as retail, logistics, hospitality etc. The office market is estimated to provide an investment opportunity of $59-63 billion through the listing of new REITs. With over 50% of India’s Grade A office stock already considered REITworthy, this market can be expected to only grow.
Residential real estate
The current size of India’s real estate is estimated to be about $477 billion; by 2047, it is projected to expand to $5.8 trillion. Private equity investments within this sector are projected to surge to $54.3 billion by that point – a CAGR of 9.5% spanning a quarter century.
What will drive this surge? An estimated 230 million housing units will be required over this period. In the next few years, demand will remain concentrated in affordable housing. However, as the share of lower-income households reduces from the existing 43% to a projected 9% by 2047, a significant share of the population will shift to upper-middle-income categories, catalysing demand for mid-segment housing. Additionally, the share of HNIs and UHNIs households in India will likely increase from 3% to 9%, trebling the demand for luxury housing.
Both the public and private arms of this recession-proof sector are in a phase of intensive growth. Prompted by the experience of the pandemic, the government is planning to introduce a credit incentive programme worth ₹500 billion to boost the country’s healthcare infrastructure. Firms can leverage the fund to expand hospital capacity or medical supplies in smaller towns, with the government acting as a guarantor. With this, one can expect to see 100-200 bed hospitals in Tier III centres as well.
The combination of exotic hospitality and medical excellence offered by premium private hospitals has caused patients from across the world to gravitate to India. By 2026, the Indian medical tourism market is expected to reach a whopping $13.42 billion. Its high-net-worth customers will settle for nothing less than the finest experience – to be provided by a combination of high-order healthcare and hospitality FM.
India’s decades-old primary health centres and district hospitals are in the midst of a rapid upgrade. Scores of new, 700-1,000 bedded super-specialty public hospitals are being set up on a war footing, outside of the traditional nuclei of public healthcare.
Sample this: In just three years, the size of this industry doubled in India. A push to incorporate digitisation in everything from smart cities and public health to payments and entertainment has jet-propelled data generation. Anticipating this surfeit, many states have announced data centre policies to attract industry players; not surprisingly, the existing 20 million sq ft stock is expected to double within just two years.
According to the latest data, only around 22% of the existing stock is LEED certified. At a time when occupiers as well as cloud operators are aggressively chasing ESG targets, incorporating sustainable practices in energy-intensive data centers will become critical for FM.