Opportunity For Realty To Rethink

The engines of the Indian economy are gradually coming out of the shadows of Covid-19 and all-round efforts are being made at various levels to mitigate the impact of this global pandemic. Now that the dust seems to be somewhat settled, corporate occupiers are looking to get back to work in a phased manner starting March onwards and by the end of the second quarter, the expectations are that approximately 70 per cent of employees should be back to workspaces. 

As the economy opens in a staggered manner, businesses across the world are reporting widespread changes in their functions as they adapt to a post-COVID-19 ‘new normal’. With the focus on developing a ‘self-reliant’ India by leveraging the strength of the country’s domestic demand, the government and the RBI have made timely interventions to minimize the impact of the pandemic on the economy, including the real estate sector – the second-largest employer in the country after agriculture.

Many financial rating agencies have predicted a strong double-digit recovery in the Indian market in 2021 and are witnessing growth across industries and sectors. While CRISIL projected a 10 per cent GDP growth in 2022, Goldman Sachs Bank is expecting a full-bound recovery by 2021. While all the major global economies were impacted by the Covid-19 outbreak in H1 2020, India’s recovery has been steady and higher than its international counterparts such as the US, Japan, Singapore, Canada, etc. With the highest rate of economic recovery and the lowest mortality rate, India has proved its leading stance internationally.

In the past few months, with multiple global investments, strong supply chains, and innovative manufacturing redesigning of spaces, technological advancement has been visible within the Indian real estate sector. While some sectors have proven to be more resilient than others and are looking forward to an early recovery of the business, the commercial real estate segment could very well become the flag-bearer of recovery in the real estate industry and things started moving right after the government decided to lift lockdown in a phased manner. Multiple new assets such as REITs, data centers, warehousing, cold storage units, and student housing have evolved and gained momentum in the recent months. If the government continues to provide measures to the industry and joins hands with private players, it will give a boost to the real estate activity in India, further accelerating the economic resurgence.

Driven by a combination of factors and accelerated use of technology due to the Covid-19 outbreak, shifts in corporate culture and use of space have been altered. The office is now expected to focus on the decentralized offices and flexible spaces in their premises and some might even want satellite offices or use a temporary hub, aiming to lower their capital expenditure and improve agility. Long-term changes to workspace design such as the use of collaborative spaces or using hot seats will be the norm going forward. We can expect more enterprises to be seen working out of Grade A spaces. With cutting-edge technology and the safety of employees as top priorities of the corporates, we believe Grade A spaces will be the most preferable choice of every growth-driven business in the coming years.

Trends in Post COVID-19 Era:

Office space has already witnessed strong interest from sectors such as technology, consumer durables, BPOs, banking, and financial services leading to a forward-looking annual growth in office absorption. While the office real estate market in India is evolving and the dynamics of the industry are changing rapidly, there is also a strong need for corporate occupiers, developers to plan ahead for the post-Covid-19 world. 

Managed workspace is set to be the latest trend within the larger office & co-working ambit. Fortified with 360-degree outsourced solution to office need and an opportunity for brands to establish a unique identity while working with other organizations. This business model works on tailor-made office solutions for modern professionals. Corporate organizations around the world are progressively seeking avenues for cost optimization and better control over peripheral expenditure. By focusing on ergonomic space management to maximize efficiency and add value, serviced office operators are offering bespoke and out-of-the-box office solutions.

Co-working and Flexible Space

At the onset of the pandemic, the market saw a mild decline in the demand for new admissions at various co-working spaces along with a slight drop in the already existing occupancy of various centres. This was largely due to organizations opting work from home model during the lockdown period. 

 This decrease in the activity gave an opportunity to the Flexible space operators to reimagine their products, offerings, and strategies. They also started to reengineer their models and to make their solutions lucrative for customers and more sustainable for their own businesses in the long run. This has led to a lot of operators inventing new and innovative long & short-term solutions to support and benefit their customers.

Return To Work:

• Strategised return to work: In the short term, corporates will require careful consideration, tailor-made re-occupation plans, and stringent safety guidelines to facilitate the return of the employee to the workplace. It will require a clear focus on employee and visitors’ safety, sanitisation, technology, and restructuring among other changes

• Flexible offices: Offices are expected to focus on the distribution of core and flexible spaces in their premises and some might even want satellite offices or use a temporary hub, aiming to lower their capex and improve agility

• Health & Wellness: In the long term, health and wellness of employees could take centre stage for the majority of the corporates; with a greater focus on workplace hygiene and increased adoption of technology

• Technology: Various commercial real estate sectors have or are looking at utilising virtual reality technology to conduct site visits and interior viewings, while artificial intelligence-enabled people-flow controls have been deployed by facilities management teams to monitor the body temperature of building visitors and mitigate the spread of the virus. The adoption of touchless technology is expected to be a focus area

• Working from home: The WFH run was a reaction to the nationwide lockdown to contain the coronavirus outbreak and it is unlikely to become a permanent concept in real estate strategies. This is due to challenges such as work-life imbalance, psychological impact on employees, data security, and monitoring productivity. 

The pandemic gave an opportunity to the real estate industry to rethink its offerings, products, and strategies. Moreover, with gradual ease of restrictions and vaccine in sight, sectors such as office, retail, Industrial & logistics have shown signs of green shoots. As for the outlook for 2021, the industry will see a rise in demand and healthy growth of existing and upcoming infrastructure as well as demand for commercial real estate will remain robust and the sector will emerge resilient and inevitably reinvent itself. 

The author is Country Head, Skootr

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.