- De-densification likely to result in additional need of space even with supply crunch
- Technology and banking clients likely to drive demand on the back of increased off shoring
Even as offices are witnessing partial return of employees at tech parks, Embassy Office Parks (EOP), India's first listed REIT (real estate investment trust) sees an opportunity in the time of crisis. While industry experts say there could be a massive 30-40 per cent supply crunch in office real estate, with over 26 million sqft of operational office space, Embassy believes that demand will pivot around de-densification of workforce in the office space and an increased demand coming in from the technology clients.
CEO Michael Holland said that there could be significant reduction in the densities of the workplace, which could be offset by more flexible work styles including work from home. He also pointed out that many people in India still believe that employees in office cannot be fully replaced by solitary work from home changes.
According to Embassy, even amid the crisis, the technology sector will continue to stand out and drive demand in the medium-term. With nearly 50 per cent technology clients in its REIT portfolio, it is positive that global technology spends will continue to grow, particularly in digital, cloud, data services and cyber security spaces, among others . "Increased cost pressure on global businesses may increase offshoring to the benefit of office demand in India in the mid-term as was the case post global financial crisis (GFC) in 2009," said Vikaash Khdloya, COO, EOP.
With large global financial banks such as JP Morgan and DBS in the client portfolio, Khdloya pointed out that unlike GFC, this health pandemic has not caused too much of a disruption to the banking clients. He currently sees no stress in the banking portfolio. "In fact, we think over the next couple of quarters to a year, as things normalise, there could be more work happening out of our parks, along with social distancing taking up more space," he added .
In an earlier interaction with Business Today, Shankar Arumugham, Chief Operating Officer, JLL India said that with social distancing and hygiene element taking a precedence, office look is all set to change. "Re-densification of office space is something IT companies will look at," says Arumugham. While he believes that the demand for IT office spaces could go down by 5-12 per cent, the re-densification measures such as change in the office layout, seating arrangement and community areas could mitigate the low demand. "The open space distancing guidelines will also change. Going forward, there will be a lot of open and free spaces in offices. The workplace guidelines for occupancy zones and seating protocol will also change," he said.