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Work from home culture may damage workspace market: Ind-Ra
Real Estate

Work from home culture may damage workspace market: Ind-Ra

07 Jun 2021 2 Min Read CW Team
Unfavourable demand created by the work-from-home culture along with the reduction in recent leasing activities as a result of a weaker economy can easily hit 40% off annual demand for the next few years, as per India Ratings and Research (Ind-Ra).

The agency told the media that this negative demand can lead to over 500 basis points increasing the vacancy levels over FY21 to FY23. While the impact on upcoming workplace providers is likely to be particularly sharp as these may struggle to let out their upcoming properties.

Almost 83% of employees surveyed recently by Accenture favoured a hybrid work model with the flexibility to work remotely 25% to 75% of the time.

Ind-Ra stated such a transition to working remotely can severely hamper office real estate demand as it may allow companies to use a hot-desking policy.

If 2.5% of total staff are asked to report to work on alternate days and use the hot-desking policy, it may result in a net 1.25% reduction in office space required in a country.

Ind-Ra said that on a base of 635 million sq ft of office space occupied in the top eight cities of India at FYE20, it will result in a negative demand of 7.9 million sq ft which is 21% of the average annual demand seen during FY19 to FY20.

Moreover, several international companies have announced hybrid work models where the employees will need to report to the office only on a few days of the week.

Ind-Ra said that occupancy at a large real estate investment trust (REIT) focusing on office portfolio has dipped to 86.8% in 4Q FY21 from 92.2% in 1Q FY21.

Further, the agency added that occupancy at another listed REIT has decreased to 81.8% in 4Q FY21 from 87.1% in 2Q FY21.

Image Source

Also read: 7,400 office leases of 90 million sq ft up for renewal in top 6 cities in 2021

Also read: Embassy REIT to invest Rs 2,800 cr in developing office spaces

Unfavourable demand created by the work-from-home culture along with the reduction in recent leasing activities as a result of a weaker economy can easily hit 40% off annual demand for the next few years, as per India Ratings and Research (Ind-Ra). The agency told the media that this negative demand can lead to over 500 basis points increasing the vacancy levels over FY21 to FY23. While the impact on upcoming workplace providers is likely to be particularly sharp as these may struggle to let out their upcoming properties. Almost 83% of employees surveyed recently by Accenture favoured a hybrid work model with the flexibility to work remotely 25% to 75% of the time. Ind-Ra stated such a transition to working remotely can severely hamper office real estate demand as it may allow companies to use a hot-desking policy. If 2.5% of total staff are asked to report to work on alternate days and use the hot-desking policy, it may result in a net 1.25% reduction in office space required in a country. Ind-Ra said that on a base of 635 million sq ft of office space occupied in the top eight cities of India at FYE20, it will result in a negative demand of 7.9 million sq ft which is 21% of the average annual demand seen during FY19 to FY20. Moreover, several international companies have announced hybrid work models where the employees will need to report to the office only on a few days of the week. Ind-Ra said that occupancy at a large real estate investment trust (REIT) focusing on office portfolio has dipped to 86.8% in 4Q FY21 from 92.2% in 1Q FY21. Further, the agency added that occupancy at another listed REIT has decreased to 81.8% in 4Q FY21 from 87.1% in 2Q FY21. Image Source Also read: 7,400 office leases of 90 million sq ft up for renewal in top 6 cities in 2021 Also read: Embassy REIT to invest Rs 2,800 cr in developing office spaces

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