The world is witnessing the impact of Covid-19 on all facets of life, in all countries and all industries. The virus pandemic cases continue to rise, people are locked down inside their homes and preferred to work from home. This Covid-19 crisis is pushing the world to explore the advantages of Work From Home (WFH), office real estate is one industry which must bear the brunt of collateral damage, as businesses placed real estate acquisition plans on hold or reduced their office footprint.
Covid-19 WFH Impact on Realtors Office
It is expected that office demand for 2020 impacted at least 30 percent as occupiers delay decisions and avoid capital expenditure. Companies have started renegotiating rents on renewals, and while market conditions are currently favorable to landlords, they are projected to become beneficial to tenants in the medium term.
It is estimated that most businesses deferred real-estate decisions in the last month of Q1(Jan-March 2020), with net office space absorption falling 30% to 8.6 million sqft (msft) from the peak of 12.3 msft in Q12019. Before COVID-19, about 6 msft of office space was occupied in India this financial year, but after Covid-19, this number is just 1 million sqft.
If Covid-19 not struck, this year prediction was space take-up of 10 msft. But it will be for optimization this year. Every company would set a goal to reduce costs, which means that they will not put in any additional money and instead will try to optimize costs by either reducing workforce or portfolio or saying people to WFH as transport costs are also a huge part.
However, most realtors believe it is just a short-term hit, and it was only in Q4 will bring out more clarity. Right now, only small businesses can cut space in the medium to long term. When the economy picks up, ample office space will be needed as businesses compete to attract talent with the right atmosphere. More American and European firms, too, will look to outsource India, a marketing platform.
While Covid-19 has broken the misconception that WFH is not effective, it has succeeded because it was forced, and employees had a general sense of job insecurity, explaining the productivity change. But it is an abnormal situation, and things would be different when the world gets to normal.
Although COVID 19 pandemic made decisions on pause for two months, effective measures of realtors helped the real estate sector kick-start again.
By: Shailaja K