CHENNAI: Commercial office space in Chennai may have to be reinvented as many startups have shut shop or suspended operations, while others are going ahead with the 'work from home' concept as COVID-19 cases continue to surge in the city.
It is for the first time that companies in India have allowed most of their employees to work from home (WFH) for a period extending over 40-55 days due to the COVID-19 induced lockdown, says Knight Frank's recently launched study on 'Investments in Real Estate'.
"Many companies have realized the benefits of working from home and the corresponding savings in real estate and other associated costs for them as well as their employees. One of India’s leading IT companies intends to have 75 percent of its staff working from home in the next 5 years," the study states.
After some teething issues, businesses and staff have adjusted to the new normal of Work From Home over the past three months, says A Shankar, Chief Operating Officer, Strategic Consulting, Jones Lang LaSalle (JLL).
But people are also missing the usual work culture and socialisation. "COVID-19 is only a passing moment. Once things settle down, office space demand will bounce back," says S Sridharan, CREDAI chairman, Tamil Nadu Chapter. He adds that the office design concept would also undergo a change to factor in social distancing.
Anup Vasanth, Managing Director, Chennai, Savills India, concurs. He says that 'work from home' is not entirely viable for some of the sectors that require a higher degree of collaboration, network security and data security. "Predictably, a medical intervention like a vaccine has the potential to alter the balance once again. In the coming months, the mix of WFH and work from office will continue to evolve and find its new equilibrium," he says.
Meanwhile, in the short term, demand for office space is expected to outstrip supply. A huge amount of workspace is expected to hit the top cities in the next 3-5 years. "The lockdown will push this supply back by 12 to 18 months. Developers would also go slow on completing these projects anticipating lower occupier demand and increase in input cost due to lockdown induced disruptions," the Knight Frank report stated.
It is learnt that this phase could even hit office rentals. Occupiers will resist any hike in rentals and look to renegotiate existing or expiring leases. "As asset owners are cognizant of the supply building up in office, they would be amenable to negotiate at lower rentals for long term leases. Hence, the cycle of strong rental growth which we had witnessed over the last 3-4 years will taper down or even stagnate, impacting valuations," the Knight Frank report states.
Interestingly, Chennai had been seeing robust leasing activity in the commercial space prior to the lockdown. "Space take-up during the first quarter of 2020 witnessed demand from technology, engineering and manufacturing firms. In terms of supply, the quarter witnessed the completion of one block of a large-sized Special Economic Zone development in Manapakkam on Mount Poonamallee Road and a small-sized IT development in Guindy in Off Central Business District," says Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East & Africa, CBRE.
Now, the city is likely to reinvent its work culture and Shyam Sundar Nagarajan, Founder and CEO GoFloaters, predicts this could take the form of hybrid remote working. Workforces and businesses would adapt to an environment that combines 'work from home' and 'work from office' through flexible workspaces, he says.
"The excess real estate capacities especially in and around residential neighbourhoods like T Nagar, Anna Nagar, Mogappair, OMR may turn into ‘shared office spaces’ for small and medium workforces booked for a short term – which could include monthly or even daily rentals. GoFloaters has been getting inquiries for shared office listings from both small enterprises and larger ones in areas like Velachery, Alwarpet and Perungudi," he says.