As Covid rages on and businesses re-calibrate their operations to survive the downturn, commercial real estate (CRE) is staring at a long road to recovery with remote working solutions like work from home (WFH) gaining prominence and employers struggling with safety and business continuity.
Developers and market watchers suggest that CRE, a favoured investment option with institutional investors, needs to create sustainable strategies for the medium and long term as there are fears that behavioural changes unleashed by the pandemic could outlive the crisis.
The industry is working with start-ups and tech firms to offer safety solutions like state-of-the-art filters for AC plants, contactless parking, entry and exit. Innovative concepts such as short-term leases to help corporates better plan their operations and options like subscription-based office supplies to reduce expenses are being considered.
India’s largest office space developer, DLF, feels it is not appropriate to look at long-term plan from the lens of the current situation. “This is the time to take care of tenant employees. Covid is an unprecedented event and I do not know whether in my lifetime it will occur again,” DLF’s managing director (rental business), Sriram Khattar told FE.
Khattar stressed on developers to deploy the best safety and wellness measures. These should be now built into their building designs and if possible to retrofit. “We would be spending around `35 crore in the next eight-10 months just on air quality in our buildings,” he said.
Emphasising on innovative concepts like short-term leases, Khattar said, “This can become a regular feature. We have to show flexibility and understanding of tenant partners’ business needs. Customer centricity will now be most relevant”.
Another innovative solution is by Gurgaon-based office interior and architecture solutions provider Studiokon Ventures (SKV). It has launched a concept ‘Happy Monday’, which includes fully serviced offices where clients can choose cost-efficient modular interiors, furniture and accessories with an established delivery time of 45-60 days. Clients also need not worry about furniture and fittings when they move out to a new location.
A strong possibility of low occupancy levels in offices as employees work from home impacts the IT-ITeS sector.
According to a recent report by Knight Frank India, the IT sector has been the key driver of India’s office space market, contributing 44% of demand from 2010-2019. On real estate operating expense, the industry spends around 4.3% of its operating income annually on such costs. Overall, office space rent paid by IT companies constitutes 0.5-2% and the remaining is the cost incurred towards operating these facilities.
Mani Rangarajan, group COO of housing.com, makaan.com and proptiger.com, said while it is certain that as situation normalises, the occupancy levels will improve. But, with some companies adopting WFH as a permanent measure, full occupancy is unlikely. “The loss of office space may turn out to be a gain for residential. In fact, there may be a gradual shift towards owning larger houses especially if WFH continues to thrive,” he added.