Several functions in industries such as manufacturing, healthcare, aviation, hospitality etc. cannot be carried out from home. For the next one or two quarters, office space demand will remain muted
In the initial weeks of the lockdown, many occupiers put their consolidation plans on hold and started re-evaluating their real estate budgets and strategies fearing loss of business. While many companies are realigning workforce and have deferred decision making, bigwigs in the IT sector such as TCS, Infosys, HCL Technologies, Wipro and Tech Mahindra have announced plans to continue hiring in 2020, albeit at lower numbers. Apart from sectors directly hit by the pandemic – such as hospitality, travel and tourism, retail and aviation, and transportation, companies in many other sectors such as mobility, supply chain, healthtech, edutech, agritech, fintech and personal hygiene start-ups are looking at attracting investor interest in these challenging times
Also, several functions in industries such as manufacturing, healthcare, aviation, hospitality etc. cannot be carried out from home. For the next one or two quarters, office space demand will remain muted. However, occupiers will scrutinize available options for long term expansion with a different mindset as now the focus on security, safety, environmental compliance and WELL certifications for buildings to improve human experience and health experience would be more than ever
Developers who can deliver such assets to occupiers will be able to command a premium for such office spaces in terms of common area maintenance (CAM) charges in the long term. Covid-19 has put pressure on strata-sold buildings and underscored the strength of Grade A office space developers, yet again
Indian office real estate continues to offer rent arbitrage to global tech occupiers in USD terms, who will remain attracted to our megacities of Bengaluru, National Capital Region, Hyderabad and Chennai to leverage the investments made in office space and talent infrastructure in the cities over the past three decades. Even after marginal rental rise due to CAM charges, the base real estate cost in terms of USD will remain stagnant for global corporates due to weakening of rupee
In 2019, the office market in India’s top eight cities clocked in 5.6 mn sq m (60.6 mn sq ft) gross leasing, a healthy 27% y-o-y upswing over 2018. On the other hand, gross office leasing shrunk to 1.6 mn sq m (17.2 mn sq ft) in H1 2020 only due to negligible office space transacted in Q2 2020 when the nation was under lockdown
The optimistic occupier sentiment witnessed before the lockdown was derailed when Covid-19 impeded the office sector’s growth trajectory. The office space demand is muted right now purely as a knee-jerk reaction to the crisis but will stabilize once clarity emerges on the cure for the corona virus
https://content.knightfrank.com/research/2028/documents/en/india-real-estate-residential-office-h1-2020-indian-real-estate-residential-office-7302.pdf
