The Times They Are a-Changin’ – sang Bob Dylan, his much-celebrated verse perhaps resonating now more profoundly than ever. It has been almost eight months that the COVID-19 pandemic threw our world into a tumultuous spin; six months since it hit the Indian shores.
And yet, even with claims of several vaccines around the corner, we have been struggling to move forward with a concrete plan. The COVID-19 crisis has, indeed, proved to be a difficult terrain to navigate, leading industries around the world to seek clearer solutions to the current predicament.
The commercial real estate conundrum
One of the major quandaries that surfaced in India owing to the pandemic was observed in the real estate industry – where would it lead the commercial real estate segment of the country?
Till the COVID-19 outbreak struck, the office market in India had gone from strength to strength, both in terms of leasing volume and institutional investment. With the onset of the pandemic, stringent lockdowns were imposed and organisations across the globe opted for mass migration of workers — from workplaces to homes — in order to contain the spread of the pandemic.
India was no exception to this major disruption, and surprisingly enough, the transition to WFH during the lockdown was much smoother than anticipated and yielded fair amount of productivity, considering the constricted business environment.
With WFH taking over and the lockdowns gradually lifting, corporates in India have been compelled to review their requirements for office space, obliged by the tightening of their revenue streams.
As a result, decisions regarding space take-up has been delayed for the most part and there have been active re-negotiation of lease contracts, leading the market to shrink significantly by the second half of the year.
Certain industries have embraced the idea of WFH more easily and for a longer term, giving rise to the question if offices were indeed required to carry on business effectively.
There is no denying the fact that the rapid evolution of technology and innovation has contributed to significant adjustments in business models across the globe, leading many companies to consider shifting to WFH on a permanent basis for a large number of employees. In the Indian context, however, there are more complexities than meets the eye.
Is WFH sustainable for the long term in India?
The Indian workforce, despite having shown its prowess in being able to adapt to WFH to maintain business continuity, is weighed down by a number of home-related encumbrances. The major challenge while working from home has been the dearth of dedicated space and proper infrastructure to work efficiently.
Besides, with schools being closed, the presence of children as well as parents at home, has led to distractions, which translates into longer working hours to perform a job in its entirety.
The blurring of professional and personal lives has taken its toll on many and consequently, most employees today, report work-related fatigue. Additionally, the lack of physical interaction and collaboration while working from a home set-up are cited as some of the key contributors affecting work performance.
The exaggeration behind the ‘death of the commercial real estate segment’
The apparent success of WFH had led many to postulate that the commercial real estate segment was bound to witness a sharp decline, its value diminished to the extent that the ‘new normal’ post COVID-19 would not see much demand for office space.
However, it is too early and implausible to write off a comprehensive and strong segment that has an extensive bearing on the country’s economic growth. Besides, it has been established unequivocally that despite the virtues of WFH, there is the inherent need of social connection for a business to perform efficiently and thrive in the long term, involving factors such as connectivity and data security which need careful consideration.
Workplaces have thus been defined as a social institution that would always remain an integral part of the societal fabric, thereby necessitating the return of the employees to their offices.
By our estimation, commercial real estate market in India stands to regain its footing in the next 12-18 months, creating newer avenues of demand.
Time to reboot the commercial real estate segment is now
The commercial real estate market is driven by its occupiers – the organisations that opt for office spaces. There is no better time to introspect for an organisation than now and come up with new strategies that impart a sense of safety and security to employees, enthusing them to return to work with a new zeal.
The onus to create office spaces for the new normal hence lies with organisations. It may choose to be futuristic, working towards mitigating risks that may arise from such unprecedented events, or stick to older pre-COVID-19 norms and face the probability of facing an adverse situation once again.
Adopting the former would undoubtedly lend a new lease to the commercial real estate segment, depicting a major shift towards efficient workspaces that promote health and wellness of the employees as well as shield businesses from drastic upheavals.
Some of the key considerations through which the commercial real estate segment could be enabled to start afresh, thus heralding a new vison for workplaces, are:
Design and space optimisation
The way the workplaces are going to run in future will depend upon the resolution arrived at regarding the question of the actual role of the office space in a business — the quantum required to run the business optimally.
Although most organisations are still trying to figure out the optimum density for workspaces and the appropriate ratios, it is imperative to acknowledge that workplaces would require to undergo considerable adjustments in how they are designed, operated and the type of services they would provide.
One of the key expectations regarding office space requirements, keeping in view the tight revenue scenario on account of business constraints, is that multiple smaller offices spread across the city would be preferred over a consolidated office located centrally. This will help the companies in de-densification of their current offices while adhering to social distancing norms.
Additionally, these smaller offices in various locations will be in the proximity of the residences of employees, thereby providing ease of commute to work. The strategy of such satellite offices would aid in boosting demand for office spaces across the city rather than concentration of office projects in the current business districts or hubs of offices.
Adoption of technology
Technology-led innovations in the commercial real estate sector, now, is expected to be fast paced and inevitable in order to allay the risks associated with such unprecedented events. Going forward, greater significance would be imparted to Artificial Intelligence in operations.
While the ‘human factor’ will still be a key component of the industry, there would be increased application of automation and streamlining of procedures encompassing diverse arenas of work — right from CRM to construction. At the same time, greater emphasis would be paid to developing and hiring skilled manpower.
An increased appetite for REITs
The advent of Real Estate Investment Trusts (REITs) in India has opened up a new avenue of investment in the commercial real estate market of the country. Buoyed by strong rental performance in commercial real estate, REITs are expected to continue their upward journey.
The COVID-19 crisis notwithstanding, consistent interest from developers towards the commercial real estate sector, coupled with demand from occupiers, are poised to be the major drivers. While the COVID-19 outbreak has somewhat weakened the office market, it is expected that once the pandemic subsides, investors’ confidence would be reinstated in the market and would aid in strengthening it further.
In the present situation, with the pandemic continuing unabated, there is no definite way to envisage the near future. We are passing through a defining moment in history and there would be innumerable overlooked factors that would determine how the commercial real estate market behaves in the forthcoming period.
If anything the COVID-19 crisis has imparted, it is that extraordinary events have a penchant to catalyse and kick-start a new environment that is more meaningful and sustainable than the previous period.
Currently, the commercial real estate market of the country is undergoing a period which is undoubtedly its most disruptive phase. But the resilience of the sector, backed by a robust IT eco-system in place and the continued interest of investors, portends its potential to bounce back.
Eventually, the evolutionary steps taken up by the occupiers would be the critical factor that will determine the new face of Indian commercial real estate in terms of readiness towards meeting the needs of the post-COVID-19 workforce.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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