Corona Clamor: Don’t Write Off the Office Market Just Yet!

Most of the businesses worldwide are currently grappling with the twin issues of low demand and uncertain future. In such a situation, it is but obvious that conservative to negative outlook weighs over positive sentiment. Due to decreasing sales and the lack of clarity, regarding future demand a lot of companies have issued pink slips to their frontline staff members which has added to the prevailing negativity. Meanwhile, looking on the brighter side, worldwide governments and business leaders have come together in the fight against corona virus and have decided to open the economy and show strong resolve in living with this virus rather than waiting endlessly for the virus to vanish / invention of a vaccine.

Even though businesses have started again but the fact remains that they are nowhere close to where they were 3 months back. There has also been a marked change in the way businesses work owing to the new normal of work from home and seating as per new social distancing norms. On top of all this the attrition invited by the current sluggish market has further put a question mark on the future of commercial real estate utilized by corporate India.

Given so much going on, the lock down just got lifted and people are able to travel between Gurgaon and Delhi in months. Slowly and steadily landlord and tenants are sharing their views with us and couple of things are coming out invariably, one, all the clamor about “work from home” and second if it’s “all negative for commercial real estate”.  Everybody is very vocal about it, especially after a couple of big corporate’s have already announced that work from home (WFH) is going to be their new normal and going forward they might cut their office going staff by 3/4th, which has added a lot of steam to the discussion and people have even started questioning investments made in commercial office real estate.

So prima facie keeping in mind the current market situation. “Why does everybody think that there will be a reduction in office space taken by corporate India going forward?”

The answer to this based on popular opinion is the following two points:

  • Large number of employees working from home.
  • Decrease in number of employees in light of recent attrition/layoffs.

 

Fortunately / unfortunately it is not as simple as it looks like at the first glance as there is more to it than what meets the eye. However, its surely holds a lot of weight in sectors directly hit by covid-19 which include hospitality, travel and tourism etc. and few big companies that are highly leveraged and have taken huge offices at cheap rentals to accommodate extra headcount.

And notwithstanding the efficacy of WFH in making the hiring process more inclusive by breaking geographical, physical and gender barriers along with economies offered in operational costs. We would still like to ask if it is enough of a reason for every business to change completely the way they have been working.

To be able to confidently say whether this trend is here to stay or not. Or if there are changes of different nature awaiting in our office space domain we definitely need to find answers to the following questions.

  • Is our entire staff self-sufficient and confident about working with minimal assistance from seniors? According to a popular survey conducted during lock down it was observed that not more than 20% of the staff of all the companies was able to work with 100% efficiency in comparison to when they worked in an office environment. Most of the staff members were unable to make even small decisions without any managerial help.
  • Are our systems up to the mark from a data security point of view? We all know the importance of data security in current times of cut throat competition, companies spend billions of dollars annually to ensure the same. However, according to a recent KPMG report a good number of companies compromised on their data during the current lockdown. Be it on conference calls through insecure connections like zoom or because of not having VPN (Virtual Private Network) to connect with their employees.
  • Does our work force live in such houses where they can comfortably work from home?We all know that most of the lower to middle grade staff lives in small houses in a joint family in such houses. It becomes very tough to work with full concentration in the middle of constant distractions caused by activities, noises and movements happening around.
  • Do all the staff members have reliable data connections? Poor infrastructure with unavailability of even a data cable connection which is considered one of the most basic requirements of an office makes a simple job like sending and receiving big emails a tedious job let alone operating applications requiring heavy use of high speed data.
  • Could decentralization be a better solution?Rather than doing away with office one might think of decentralizing the office by taking small offices, doesn’t matter either a co-working or an independent small office, in different parts of the city and leveraging the power of technology to de congest their office and improve the work life balance of their employees by allowing them to work from a location close to their house.
  • Don’t we think this spurt in unemployment is only transient? There is no reason for going completely negative about India growth story and India Inc. will be back on its feet sooner or later. If not more than at least as many people as were fired will be hired again. Which will again increase demand of office space to accommodate them.
  • What about the expenses to be incurred on interior of the new small office taken? Keeping in mind the current liquidity crunch companies would rather want to put their resources into something more productive rather than inviting an expense of doing a new office.
  • Will companies let the money invested in current setup go waste? When companies take a new office they put millions of rupees in doing the interiors of the office keeping in mind that they would amortize the cost over the next 9-12 years, leaving the old office as knee jerk reaction would bring that extra burden to their books.
  • Will companies not need more space to comply with the social distancing norms? The extra space created by employees working from home and those who have been fired could definitely be utilized to maintain adequate social distancing in sitting areas and taking pressure off the common service areas like cafeteria, meeting rooms , washrooms and common areas etc.
  • Have we given enough thought to WFH’s psychological and mental health impact? We humans are social beings, in comparison to what is taught in schools through textbooks we learn more by observing our seniors and colleagues. In absence of any such opportunity it will be very tough to differentiate between the work culture of an MNC and a local setup. One big reason for youngsters choosing MNC’s over small companies, even on lower salaries, is the beaming work culture and social engagement platform offered by these workplaces. The absence of a team environment in an extended period of work from home could start making them feel depressed due to isolation and loneliness, this will not only impact productivity of the employees but it could actually be a great cause of  some mental health crisis.

 

There could be several other factors regardless, companies will surely consider all these points very seriously before taking their final call on this matter. We are always of the opinion that one suit does not fit all. We do understand that change in office space requirement is the future is something written on the wall, it is inevitable. However at the same time we do not see corporate’s showing any knee jerk reaction, they would for the time being rather try to negotiate with their landlord and get some discount during the slump.

It is only once the dust settles that everybody will reassess their real estate requirement in the light of their technological advancements and ensure optimal use of office space. Investment in real estate will be substituted by investment in technology  to get the entire office on a single secure data sharing platform irrespective of the location of staff members by spending on software’s , data security ( which is already in transition phase with advent of data centers ) and secure networks. Remote working and disintegrated office being the way forward on the other hand we think WFH may become popular with certain IT companies but might not fit the bill for all. All in all, obituaries to the office space are premature however the nature of demand for office space will surely see a change for the better. Good offices will become even more expensive and the ones which choose to remain dumb will go southward.

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