The news that the office space real estate market is finally gathering steam is definitely music to the ears of stakeholders and investors. As information technology(IT) and IT-enabled services(ITES) companies return to office, a rebound in demand is pushing the commercial real estate market, which is expected to peak by the end of 2021.
A recent a rock report mentions that among the top seven cities — Bengaluru, Hyderabad and Chennai — witnessed their share of total office leasing increase to 66% in the financial year 2021, from 47% in the financial year2018. The other top markets are Mumbai Metropolitan Region (MMR), Pune, Delhi-NCR and Kolkata.
In cities like Mumbai, Chennai, Bengaluru or Hyderabad, regions which are prime residential hotspots are being preferred by co-working and IT/ITES players who are making a rush for office spaces close to these residential areas to create a superior balance between work-from-home (WFH) and work-from-office (WFO).
While the commercial leasing activity did pick up pace in the first quarter of the financial year 2021, however, the threat of an impending third wave had largely resulted in subdued demand.
Overall, the Covid-19 has been a major game-changer, making WFH as the prominent need of the hour. Earlier, many IT/ITES companies and other corporates had shifted a significant chunk of work, be it coding or non-client-facing back-office functions, out of offices and into their employees’ homes.
This had led to the commercial real estate market getting significantly impacted as lockdown measures disrupted the traditional way of working from an office set-up. Several corporates had to adopt WFH as an alternative, which brought in its wake, a new set of possibilities and challenges.
However, it has long been stated that WFH is not a sustainable long-term solution for all companies. At the most, WFH could only be a supplement to the traditional way of working from office. Experts had predicted that WFH could impact the office market demand by an estimated up to 20% in the medium to long term. They were also quick to point out that this dip will be counter-balanced by increasing demand for office spaces from emerging sectors like healthcare, e-commerce and data centers. De-densification and splitting of offices are expected to further drive demand, according to these experts.
Now, the green shoots of recovery are pretty much visible given the deal pipeline and discussions between developers among the existing as well as potential occupiers. Things definitely look upbeat for the commercial real estate sector, finally.
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