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What’s the future of office space?

According to the Accenture Future of Work Study 2021, 83% of employees surveyed favoured a hybrid work model, with the ability to work remotely 25-75% of the time. (Photo: Hindustan Times)Premium
According to the Accenture Future of Work Study 2021, 83% of employees surveyed favoured a hybrid work model, with the ability to work remotely 25-75% of the time. (Photo: Hindustan Times)

  • The covid-19 pandemic has ended the office’s role at the core of work life for many. But what comes after?
  • As the inevitability of hybrid or flexi work—a combination of the office and a remote location—takes root, companies are also waking up to a new set of challenges

BENGALURU : Over the past month, IndiQube, a Bengaluru-based startup, has handled a flood of new queries. The firm, a managed flexible office space provider, has done at least 25 virtual demos of its in-house office management tool. The target segment: companies that are aiming to make their workspaces future-ready in a post-covid world.

From tracking visitors and monitoring work desk usage analytics to cashless/touchless pantries and cafes, IndiQube’s app MiQube can step in and automate a wide array of tasks.

“There is interest from enterprises, late-stage startups as well as mid-sized office parks," said Rishi Das, co-founder, IndiQube. “The demand is to increase technology and automation in workspaces going forward. We are seeing even the top leadership of enterprises taking active interest on this front."

As the inevitability of hybrid or flexi work—a combination of the office and a remote location—takes root, companies are also waking up to a new set of challenges. What happens if nobody wants to go into an office on a Friday? “Hot desks", which can be used by more than one person, will need to be dynamically monitored and rationed out. How will the in-office cafeteria adapt to ever-shifting footfalls? Technology will be a key part of the solution. New organizational policies may also need to be crafted. What is at stake is the nature of the office itself, which is set to transform, perhaps more swiftly than at any other point in living memory.

Tech giants across the globe have spoken about a permanent shift to hybrid work and the need to re-craft the traditional office, even beyond the pandemic. Come September, Apple Inc. has asked its employees to come into the office only thrice a week (Mondays, Tuesdays and Thursdays), with the option to work remotely on Wednesdays and Fridays.

IBM Corp. expects 80% of its employees globally to work in a flexible workspace. About 10-20% of the workforce may never go to an office ever. The way this strategy would affect the work culture is indeed a concern, IBM’s chief executive officer (CEO) Arvind Krishna said at Bloomberg’s Future of Work seminar in April.

Technology firms like IBM, among the biggest office tenants in India, have gone back to the drawing board in order to create return-to-work playbooks—on how and when to bring back people to offices, and what must be done to re-purpose the existing workspace.

Collaborative workplaces with more open spaces will be important in the future, said Chaitanya Sreenivas, human resource leader at IBM’s India unit. Multiple teams will assemble for a project in the office, driven by specific client needs, finish the assignment and then quickly disband. “IBM has been flexible about work-from-home and, when necessary, to bring people together in offices based on skills, projects, and to collaborate and innovate. The pandemic has accelerated the need to have a flexible work model," he said.

IBM does not disclose its India headcount, but it is estimated that the country accounts for about a third of the tech firm’s global workforce. Since the onset of the pandemic, physical occupancy at IBM India’s offices has been at around 2% of pre-pandemic levels, with almost all of its employees either working from home or from client sites. The company will take its time to decide when to bring a part of the workforce back to its India offices.

For India’s commercial office sector, meanwhile, the nervous wait-and-watch approach is set to continue. Before the second wave struck, many firms had started preparations to bring employees back to the office in June-July. The acute devastation caused by the second wave has not only put those plans on hold but has also nudged many firms to seriously consider more fundamental changes to the office—in order to get it future-ready.

Future workplace

Though the impact of the second wave on the office sector is a bit early to gauge, I expect that there will be some amount of hybrid working…companies will want to save cost and may give up some office space," said Anshuman Magazine, chairman for India and South-East Asia, Middle East and Africa, at property consultancy CBRE Group Inc.

Analysts say the pandemic has clearly changed the way businesses operate and workplace flexibility is the new normal.

After a record 45.6 million sq. ft of office space was leased in 2019 in the top Indian cities, the pandemic pulled it down to about 25.82 million sq. ft in 2020, according to estimates prepared by the India unit of real estate services company Jones Lang LaSalle Inc. Hadn’t it been for the second wave, property consultants were expecting 2021 to end with 32-35 million sq. ft of space absorption. That may not be possible now.

The reason lies in the hints dropped by some of India’s biggest firms. The country’s largest IT services firm, Tata Consultancy Services (TCS) Ltd, in its 2020-21 annual report published in May, said its offices will transition into ideation and innovation hubs, which will facilitate in-person interactions only for brainstorming and team building; day-to-day work can be performed from anywhere.

TCS last year said as and when the pandemic is contained, the company will start transitioning towards a hybrid work model. By 2025, no more than 25% of its employees would need to be at a TCS facility at any point in time and no one would have to spend more than 25% of their time at the office.

“This is a balanced approach and will give our employees the best of both worlds," Milind Lakkad, chief human resources officer at TCS, said in the annual report. “In this model, the role of the office itself will change significantly. Earlier, the office was where one performed day-to-day activities and off-sites were meant for business planning or team motivation. The new model flips that."

The ‘core+flex’ strategy

In effect, covid-19 has ended the office’s role at the core of work life. What follows, at least initially, is likely to be a “core+flex" strategy.

The second wave has prompted more conversations about incorporating co-working spaces. On the back of this new demand, CBRE expects India’s flexible office stock to expand by 10-15% year-on-year from the current 36 million sq. ft in the next three years. Bengaluru holds flex stock of 11.6 million sq. ft, the most in the country, followed by Delhi-National Capital Region and Hyderabad, according to figures disclosed by CBRE in a May report titled The Future is Flex. In 2020 alone, over 75,000 “seats" were leased in flex spaces across top cities.

Growth-stage, well-funded startups and enterprises, which have been on a hiring spree in recent months, are all looking at a mix of traditional office campuses along with flexible and managed workspaces.

For instance, cab aggregator Ola, which leased around 400,000 sq. ft in Prestige RMZ Startech in Bengaluru earlier this year, has also taken another 500 plus seats of flexible workspace in the Prestige Lexington building close by.

Similarly, IBM, which has a large office in Embassy Manyata Business Park in North Bengaluru, has expressed interest in taking up flexible space in South Bengaluru for its employees, said a person familiar with the development.

Not everybody wants to go through a two-three hour daily commute any longer. So, many corporate entities are exploring satellite offices and centres in multiple cities in order to increase overall productivity. “We are witnessing strong demand from IT/ITES and financial services firms," said Kunal Walia, founder and CEO of Simpiwork Offices Pvt Ltd, a flexible workspace operator.

Walia said the pandemic has brought in a lot of uncertainty and created a situation in which even large corporate entities are unsure about the immediate future. “Under such circumstances, companies are opting for solutions like ours, where they can conserve capital for their core operations. Also, the very nature of office demand is changing. While people were earlier looking at large campus facilities with 5,000 or more people in a single location, today, they are re-looking at this strategy from a risk perspective," Walia added.

Multitude of models

Most traditional office developers, from DLF Ltd in the north to Prestige Group in Bengaluru, have opened up spaces to a slew of flexible operators, who’ve been tasked to manage and run the premises. Consequently, there is a multitude of workspace models which are emerging within the flex ecosystem based on the degree of customization and enterprise focus, according to the CBRE report.

This could range from a shared co-working setup for early-stage startups to partially customized, full-service space with a mix of private cabins, dedicated and open desks for large corporate entities and late-stage startups. Then, there could be managed offices with fully furnished, private or semi-private facilities with a focus on enterprise clientele.

Viral Desai, national director of office transactions at property advisory Knight Frank India, said traditional companies would likely test the flexible workspace or the “hub and spoke" model, but that can happen only when employees return to offices and things open up.

For now, multinational companies, which deem India to be a preferred back-office and offshore destination, have been in no tearing hurry to bring employees back to their offices. For over a year now, office parks have been mostly empty.

Before 15 April, for about three months, the buzz was back to some extent. Enquiries from potential occupiers had gone up, even if not at par with pre-pandemic levels, and some people had even started working out of offices. The impact of the second wave was harsh and brought things to a halt again.

Physical occupancy in DLF Cyber City, Gurugram, for instance, was 15-20% at the beginning of 2021—the highest in a year. “Tenant-occupiers are working out various strategies for workspace solutions. These have slowed down due to the intense second wave, but will play out over the next few quarters," said Sriram Khattar, managing director of DLF’s rental business. “Landlords who offer better ventilation or air filtration systems, contactless entry and exit, and safety and wellness initiatives will score going forward," Khattar added.

Although covid-19 has prompted a rethink about the nature of the workplace, top office developers still believe a return to the offices in some form is inevitable.

Vikaash Khdloya, deputy CEO and chief operating officer of Embassy REIT, said leasing queries and site visits had picked up from January until the onset of the second wave. “There has been a deferment in decision-making, but we expect strong recovery after two-quarters of muted demand. We expect occupiers to bring back employees to offices in the next few months as the caseload falls and vaccine roll-out gathers momentum," he said.

“Tech companies are looking for office space close to home to reduce employee commute. They will look at flexible spaces, but the demand for Grade A office space will not reduce," said Vinod Rohira, CEO, Mindspace Business Parks REIT.

With people starting to return to offices in the US, and China experiencing a recovery in the office sector, offices will make a comeback, even if in a different avatar, said Juggy Marwaha, CEO, Prestige Office Ventures.

There are also signs of demand from emerging sectors like pharmaceuticals and healthcare and financial technology, reducing the real estate industry’s overall dependence on technology companies.

Even within the tech ecosystem, there is enough scepticism building up about the long-term viability of out-of-office remote work on a sustained basis. While announcing Apple’s new workplace policies, CEO Tim Cook also said, “Video conference calling has narrowed the distance between us, to be sure, but there are things it simply cannot replicate."

Employees don’t seem to mind for now, which is driving the shift in the first place. According to the Accenture Future of Work Study 2021, 83% of employees surveyed favoured a hybrid work model, with the ability to work remotely 25-75% of the time.

However, Microsoft Corp. CEO Satya Nadella wrote in May that while a majority of employees do want flexible work options, they also want more in-person collaboration post-pandemic. Nadella called it the hybrid work paradox.

As is the case in the early phase of any big transition, there are more questions than answers at the moment. All eyes will be on the “return to work" playbooks that many firms have been preparing. In the coming months, they will determine how much space firms will end up occupying, the area they will allot per desk, the splitting of large offices into smaller ones, and the wellness and health protocols that will hopefully lay at the heart of the future workspace.

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