Commercial real estate is considered a more lucrative and reliable investment than residential property. But the work-from-home culture sweeping across the corporate sector could change that.
“With so many people working from home, large companies are discovering that they don’t need so much office space,” says Anil Primlani, CEO of real estate consultancy Prime Associates.
Some of India’s top professional services firms and IT companies are considering surrendering a part of their rented office space as they look to implement work from home for employees even after the lockdown ends.
It is estimated that 15-20% of executives will continue to work from home. Apart from keeping employees safe, the move will also substantially reduce rental costs. Almost five lakh square feet of office space has reportedly been vacated in the past two months. Another five lakh square feet may be vacated by June end.
Some companies are cutting down more. Mid-sized NBFC Clix Capital which has nearly 600 employees — is planning to vacate half of its office space. “At least 50% of our staff will permanently work from home. It will help us give up about 40,000 sq ft of space,” says Pramod Bhasin, Founder, Clix Capital.
Though demand for office space will come down, it is not expected to crash. The need to de-densify office spaces to maintain social distancing would compensate for any possible dip in demand, according to Ramesh Nair, CEO and Country Head, JLL India. Companies are expected to modify their offices to suit new norms and guidelines.
Many employers will need to scale up the usable area for each employee. “We expect a surge in demand for redesigning office spaces to maintain and incorporate statutory guidelines or international standards and practices. Companies will make changes in their offices depending on their work-from-home policies,” says Tushar Mittal, Founder and Managing Director of SKV.
As more executives are required to work from home, there could also be an uptick in demand for bigger, more flexible houses. Real estate consultant Anarock says people will need functional and flexible homes with an ability to convert rooms into workspaces. “The product offerings may be redesigned by builders,” says a report by Anarock.
At the same time, the job losses and salary cuts are making people shift to smaller accommodations that fit into their pruned household budgets. “After the salary cuts, many people living in 3-BHK apartments now want to switch to 2-BHK flats or move to more affordable locations,” says Primlani.
June 15, 2020