How will WFH impact office space demand?

Commercial real estate has been a reliable mainstay of the Indian real estate sector, remaining vibrant even while residential property remained in the doldrums. Now, the coronavirus has thrown a serious spanner into the works of this lucrative real estate segment, at least for next two quarters.

In the backdrop of present-day day compulsions, more and more companies are discovering the viability of employees working from home (WFH) as an alternative to occupying costly office spaces. Many IT/ITeS companies and other corporates are now warming up to the notion of shifting a significant chunk of work, be it coding or non-client-facing back-office functions, out of offices and into their employees' homes.

The Covid-19 pandemic has been a major gamechanger, making WFH a respectable and even altruistic decision. There are at least three major benefits. First, companies can save a lot of revenue on office space occupancy. Secondly, WFH can be a major productivity enhancer as employees save the time which they would ordinarily spend on daily commutes. Thirdly and as a derivative of the second benefit, it can significantly boost employee wellbeing.

WFH is obviously not a catch-all solution - many business verticals and functions still require employees to work in an office setting. A large chunk of work needs constant monitoring and professional infrastructure which only an office setting can provide. Nevertheless, market dynamics are changing quickly now.

Coworking

Coworking is likely to see subdued demand over the next few quarters, but will also see the fastest revival - the pandemic pressures will eventually ease out many businesses will look to restart in these flexible workspaces. Coworking spaces are not only the most cost effective, but also offer flexibility in terms of time period of rental agreements. Coworking spaces can be rented on a monthly, day-to-day and even hourly basis.

Conventional Offices

Traditional office spaces are currently a source of worry for both tenants and landlords. This is because it is difficult to visualize and plan for a post-pandemic market scenario. However, when the Government's focus shifts back to economic growth, it will roll out business-boosting incentives that will revive the fortunes of commercial office spaces quickly.

What is certain is that commercial space requirements are in for a major upheaval, as India Inc will not hit a 'business as usual' equation for quite a long time. Tenants will recalibrate their space requirements, and the effective average monthly per-desk rentals at Grade A office spaces in some of the major business cities will be a central consideration.

Monthly per-desk rentals

Hyderabad

Average monthly rentals in Grade A office spaces in CBD (central business district) areas like Gachibowli, Madhapur, Manikonda, Kondapur etc. are anywhere between Rs 4,750-7,650/desk/month for co-working spaces and between Rs 6,000–9,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20 per cent.

Average monthly rentals in Grade A office spaces in SBD (secondary business district) areas like Pocharan, Uppal etc. are anywhere between Rs 3,600–6000/desk/month for coworking spaces and between Rs 3,500–7,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35 per cent.

Bangalore

Average monthly rentals in Grade A office spaces in CBD areas like MG Road, Millers Road, Vittal Mallya Road and Residency Road are anywhere between Rs 7,000–15,000/ desk/ month for coworking spaces and between Rs 10,000–18,000/ desk/ month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20 per cent.

Average monthly rentals in Grade A office spaces in SBD areas like Koramangala, Bannerghatta, Hosur road, Electronic City etc. are anywhere between Rs 3,600–8000/desk/month for coworking spaces and between Rs 6,500–15,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35 per cent.

Work From Home - not a catchall alternative

For India Inc, the evolution of the WFH option is at least as exciting as that of coworking – if not more, considering its multiple benefits. That said, it will not work for every type of company. Most major industries have functions which require a high level of centralized supervision as well as data security which are only available in a formal office setting. As is becoming evident in this trial by fire, video conferencing technologies have very distinct limitations, too.

Most employees depend on the infrastructure provided in their offices to do their work efficiently, and also require a formal office setting to get into 'work mode'. While WFH is not a one-size-fits-all workplace alternative, social distancing norms are likely to remain in place for a while to come and more and more companies will need to consider this option.

(The writer is Director & Head - Consulting, Anarock Property Consultants)