4 min read.Updated: 10 Feb 2021, 04:49 PM ISTBrand Post
A webcast titled ‘Commercial Real Estate: Deflecting the Covid Curveball’ presented by Livemint in association with Nucleus Office Parks, a 100% Blackstone subsidiary, looks at the challenges faced by the commercial real estate sector, the emerging trends and avenues for future growth.
Recovery, Resurgence and Reform – these are the buzzwords for 2021.
Countries across the world are gearing up for economic recovery. Vaccine rollouts and continued support from the Government and Central banks have infused optimism in Global markets as recovery across sectors is slowly gaining momentum.
Grade A Commercial Real estate remained resilient through the pandemic with almost minimal rent revenue loss or space surrender by occupiers. Most tenants of such properties are marquee Global MNCs who run large headcount operations from India.
The World Bank forecasts an annual growth of about 7.4 per cent for Asia Pacific. With lockdowns easing out across Asia Pacific, many employees are returning to the office and maintaining hybrid set-ups and demand for commercial real estate is already picking up.
“We have seen the sentiment going up with an ongoing recovery. With the exception of hard heat sectors such as hotels and retail, we have seen a resilience in prices in commercial assets," said Sigrid Zialcita, Chief Executive Officer (CEO), Asia Pacific Real Estate Association (APREA).
The way we live and work will see a change in this post-Covid era. Amongst all the change, the central theme that is emerging is the transformation of the office itself. A shift is expected from fixed spaces to a corresponding increase in demand for de-densified work spaces.
“The office is not just a building anymore. It is predominantly the space for building organizational culture and collaboration. An office needs to address the growing demand of occupiers to provide spaced-out, larger, personal space with cleanliness and sanitization at the core of it. Many of our mature occupiers are putting a lot of emphasis on health and safety and providing these amenities will be the responsibility of the office owners," said Quaiser Parvez, CEO, Nucleus Office Parks.
Office is here to stay and remote working is never going to replace the need and experience of a physical workspace. As employees are returning to work, Grade A commercial offices are scaling up their health & safety protocols to welcome them back. Technology is the differentiator and the enabler for offices to deliver a world-class safe and secure workspace to the tenants.
There are some challenges that the commercial real estate sector has to address as we resurface from the crisis and the workforce gets back. “There are two important areas that need to be focussed upon. First, technology which is now deeply entrenched in the corporate real estate side and raising the bar with customer experience," said Vinod Mathews, Director – Global Real Estate and Facilities (GREF) Group, Amazon (India, APAC and ANZ).
"Some countries have got straight back into the offices just as it is normal. In India, we haven’t and are expecting a gradual and managed return to office. The biggest outside factor which is out of our control is the commute because that is where the compression is. People are alright coming back to the offices because that’s where less density is. We will be getting back to the old normal, but with the flexibility of managing levels of density. In India, because of the huge commute times, people are enjoying having that extra three hours, one for themselves and two to be more productive," said James Woodburn, Head of Real Estate – Asia, WPP.
The future outlook for India in terms of commercial retail is optimistic. “We will see growth continuing from an India perspective. The front office sectors like banking, insurance have seen a quicker recovery with almost 50 percent of the staff back in office. The IT sector has been slower because of the flexibility. The fatigue is already built in and the challenge for most organisations is to keep up the levels of delivery remotely," said Ram Chandnani, Managing Director, Advisory and Transactions, CBRE.
India’s workplace culture is very closely linked with the residential sector, where some new trends are emerging. “The demand for integrated townships is on the rise. We are seeing the need for larger spaces on homes where everyone needs half a room extra for the office. As work from anywhere becomes real, weekend home sales have jumped. Also, people are seeking better facilities at the workspaces," said Anuj Puri, Chairman, Anarock Property Consultants Pvt Ltd.
While 2020 witnessed a slowdown in demand, the supply also slowed down correspondingly. There still exists a shortage of good quality Grade A office supply for the next few years; thus keeping the rental growth steady.
“Developers are being creative and are offering rent free periods rather than letting the prices drop. Over the last 5-6 years, the commercial graded real estate space has been growing by about 15 percent. Of this, 5-6 per cent is volume driven and 8-10 per cent has been pricing. There may be a slight drop there," said Neetu Vasanta, Managing Director and Partner, BCG.
This demand and supply equation may get balanced with the new trends – de-densification and tech-enabled intelligent offices, which seem to be here to stay. So, while the office will very much be there, its shape and structure will meet the demands of the changed workforce.