The changing landscape of realty investments

While we cozy up to live in our dream house, the criterion for house keeps changing and updating over the years. The trends in the economy, the work, culture also make up as the variables. The sharing economy got us trends of co-working, co-living, etc. bringing shifts in the commercial and residential landscape, creating opportunities that were serviced by multiple new companies. The employment options, the safety of the location, etc. also play a role in the development of a geography. Above all, the attitudes of the potential customers and their preferences alter the existing options giving way to newer trends.

The evolving pandemic has begun to question our conventional wisdom of work/office area. Earlier, work-from-home (WFH) was an extreme option used by the employees after an approval from their employers and was only for a limited period or with restrictions. With the guarantee of the safety of the employees in question, the employers are voluntarily encouraging or imposing WFH for the employees. In many cases, as lockdowns began across the geographies, companies began to enforce WFH options for the employees.

There was a certain period, initially, to get accommodated and conduct team meetings or coordination across a large number of employees, but slowly began to adapt to their new environments. Both the employees and employers worked around the situation to continue to engage and garner productivities, in some cases even enhanced productivity. One of my friends has joined as a head of Human Resources (HR) of company during the lockdown. He was on boarded through online and has been managing his job ever since, a feat unthinkable even a few months back.

Increasingly, many companies began to announce the WFH initiative beyond or irrespective of the lockdowns and into the future months. This is especially true with the knowledge industry which has the comfort of operating from anywhere. Some of the companies already began to consider the variation in the compensation to fit the evolving structure of WFH. Some are mulling to compensate for the extra infrastructure put up by the employee to ensure their homes are work ready.

There are some organizations, realizing the condensed costs of the rents due to the reduced workforce attending workplace have started to identify which of the non-critical areas that could be moved to WFH category. Since the pandemic, news reports suggest that Alphabet (Google's parent) has pulled out of deals to acquire more than two million square foot (sft) of office space.

Software industry body National Association of Software and Service Companies (Nasscom) has said that a large part of IT workforce will work from home in the next three years. This could adversely impact the rental yields of the commercial spaces. Add to that is the physical distancing norms which confine the number of people present in common areas like malls, theatres, etc. (when opened) would drag the commercial space productivity.

However, there are some companies, which can't completely implement WFH, have begun to redesign their existing offices to the new norms of social distancing with concept of 'space auditing'. Some other are adding 'Covid overlay' to their under-construction properties to make them more complaint with the new guidelines and evolving modifications including amended furniture.

The industry which has been trying to improve the footfalls, maximizing the monetization of per sft. would suddenly staring at difficult choices of altering their business models and at an uncertain future. So, the larger unemployment, closures of leisure places/restaurants, retail etc. could be offset by the expanding outlays of the new requirements of social distancing and increased per sft space for each individual.

Like every threat creates a prospect, the current homes or living spaces are not completely equipped for the changing work requirements from homes. This could lead to alterations in the layouts, sizes and even the location of the house. With wider adoption of WFH culture, the urge to reside nearer to workplace loses sheen, giving an uplift for spacious & suburb living.

This further would have an impact on the large retail structures which used to attract huge masses and with higher convenience of various options. The increasing embrace of online tuitions by the schools and the govts could also be a deathblow to the prime residential locations which are proximate to the premier educational institutions, malls, etc. These mindsets changes to actualize into behavior would get more ingrained as the gestation for the cure of this virus goes longer. Certainly, we're in for a different world and our traditional perspective on real estate as an investment is set for a transformation.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)