De-densification, expansion plans may lead to signs of recovery for the office sector by 2021, according to Colliers Research.
As many as 40 percent commercial space occupiers intend to lease new office space in the next six to eight months while 5 percent want to take up a flexible workspace and 12 percent plan to incorporate a flex and core model to tackle the challenges brought by the coronavirus pandemic, according to a new report.
Most commercial space occupiers are currently focusing on building a ‘flex and core’ portfolio that includes a flexible office space for medium and long-term lease for core operations and de-densification of office spaces. This coupled with expansion plans will augur well for the leasing activity leading signs of recovery by 2021, Colliers Research has said.
The survey said that most occupiers are evaluating lowering workplace density by up to 20 percent compared to pre-COVID situation. As many as 25 percent occupiers stated that they plan to expand their footprint over the next six to eight months and almost half intend to expand their CRE portfolio by up to 20 percent, reflecting positive occupier sentiment in the market.
Among occupiers planning to expand their CRE portfolio in the next 6-8 months, 40 percent intend to lease new office space, another 5 percent intend to lease flexible workspace while 12 percent plan to incorporate a flex and core model, the report noted.
Colliers International surveyed occupiers to understand real estate strategies and measures that they are undertaking to survive the COVID-19 times. It solicited responses from over 70 occupiers operating in the technology, financial services, professional services, engineering and manufacturing, flexible workspaces and healthcare and pharmaceuticals sectors.
"Occupiers are exploring new business models which is forcing landlords and occupiers to adapt to new demands. Therefore, collaboration and transparency between landlords and occupiers will be key. The real estate strategy now looked upon by some occupiers is around building ‘flex and core’ portfolio that includes a flexible office space for medium and long-term lease for core operations. The tech sector has been adopting ‘flex and core’ models quite successfully," said Sanjay Chatrath, Managing Director, North India at Colliers International.
"De-densification of workplace is the key to unlock benefits in the post COVID era. It helps occupiers to maintain social distancing, enhance the office space wellness criteria, and reduce infrastructure woes of a city. The success of "work from home" model in the IT/ITES sector allows occupiers this flexibility today," said Arnab Ghosh, National Director, Fitout at Colliers India.
The survey also said that almost half of occupiers suggested that only up to 30 percent of their workforce will return to the office in a phased manner over the next two to three months. Further, 38 percent of occupiers mentioned that they plan to continue with their remote working plan (Work from Home) for select workforce at least for the next six to eight months. Occupiers are likely to consider remote working policies to the extent possible while still accepting some degree of risk as they begin re-populating their offices, as minimising physical interaction is the most effective measure to combat COVID-19.
It indicated that about 46 percent of occupiers plan to resume their business operations with a combination of policies such as flexible work hours and rotational shifts.
"The pandemic has altered the way occupiers and developers had conceived workplaces as the current times warrant increased emphasis on employee wellness initiatives while companies strive to keep business operations afloat. As occupiers begin implementing strategies with the objective of minimizing physical interaction, Colliers expects de-densification coupled with their expansion plans to augur well for the leasing activity leading the sector to show signs of recovery by 2021," said Megha Maan, senior associate director, Research at Colliers international.Follow our coverage of the coronavirus crisis here