De-densification coupled with expansion, to drive office sector recovery by 2021: Report


Social distancing norms following the Coronavirus pandemic, will lead to de-densification and greater absorption of office spaces, as occupiers focus on the health of employees, says a report by Colliers International

The Coronavirus pandemic has altered the way occupiers and developers conceive workplaces, as the current times warrant increased emphasis on employee wellness initiatives, while companies strive to keep business operations afloat. Accordingly, workspace design could see a reversal, with de-densification becoming the norm to keep employees safe, says a survey of occupiers by Colliers International, to understand real estate strategies and measures that they are undertaking to survive these exceptional times. Colliers 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,” says Sanjay Chatrath, managing director, north India, at Colliers International.

 

De-densification coupled with expansion, to drive office sector recovery by 2021: Report

Source: Colliers International

 

Temporary reversal of workplace design

The current pandemic warrants an increased thrust on health and wellness, leading landlords and asset managers to consider several options that help contain the spread of COVID-19. They are now considering de-densification of workplaces, better ventilation and cleaning in the buildings, voice or motion-activated doors and elevators to reduce the number of points of contact and anonymous reporting of sickness, to help keep occupiers safe and healthy, while slowing the spread of germs.

“De-densification of the workplace is the key to unlock benefits in the post-COVID-19 era. It helps occupiers to maintain social distancing, enhance the office space wellness and reduce infrastructure woes of a city. The success of the ‘work from home’ model in the IT/ITES sector allows occupiers this flexibility today,” says Arnab Ghosh, national director, fitouts, at Colliers India.

 

Display of openness by occupiers towards remote working

Based on the survey, almost half of occupiers suggested that only up to 30% of their workforce will return to the office in a phased manner, over the next two to three months. Further, 38% of occupiers mentioned that they plan to continue with their remote working plan (or 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.

Occupiers are evaluating their core business functions that require employees to be present at offices, so that they can effectively implement strategies involving rotational shifts and flexible working hours. Our survey indicates that about 46% of occupiers plan to resume their business operations with a combination of policies such as flexible work hours and rotational shifts.

 

Occupiers evaluating de-densification of workplaces by up to 20%

To prioritise employee health and wellness, occupiers are revisiting their density plans in existing offices and evaluating options to adhere to the new norm. They are considering several measures, including doing away with hot-desking, repurposing meeting rooms and common meeting places and accelerating adoption of technological tools that enable them to achieve their objective. Most occupiers are evaluating lowering workplace density by up to 20%, compared to the pre-COVID-19 situation.

58% of occupiers showed an inclination towards making immediate physical changes to office seating plans, when employees return to the office. Further, it may take up to three quarters for occupiers to find their most efficient strategy, while reviewing existing office layouts for reconfiguration.

“The COVID-19 crisis and more so the uncertainties around the recovery, in a way has been a blessing to many organisations, which have been wanting to bring down their real estate spends by encouraging employees to work from home. Capitalising on this situation, the CXOs will soon figure out how technology can be induced in their business, to ensure team collaboration and productivity, while optimising on real estate spends,” said Rajesh Shetty, managing director, real estate management services, Colliers India.

See also: How Coronavirus could change office interior designs in 2020

 

Expansion plans amidst social distancing norms likely to sustain office leasing

De-densification coupled with expansion, to drive office sector recovery by 2021: Report

 

De-densification coupled with expansion, to drive office sector recovery by 2021: Report

 

Until the pandemic subsides, we believe the de-densification of workplaces to maintain social distancing, will push occupiers to scout for more space. Based on our survey, 25% of occupiers stated that they plan to expand their footprint over the next six to eight months. It is noteworthy that almost half of these occupiers intend to expand their CRE portfolio by up to 20%, reflecting positive occupier sentiment in the market. Amongst occupiers planning to expand their CRE portfolio in the next six to eight months, 40% intend to lease new office space, another 5% intend to lease flexible workspace, while 12% plan to incorporate a flex and core model.

We believe occupiers’ expansion strategies, coupled with social distancing norms stressing de-densification, will lead to increased office absorption over the next six to eight months. This should offset the decline in demand for office space that is likely to occur due to the economic slowdown caused by COVID-19. We expect occupiers to offer flexibility to employees. However, office absorption will likely be robust and the sector should start showing signs of recovery in H1 2021.

Considering the importance of employees’ health and wellness, we see occupiers making considerable investments that should also boost morale, leading to higher productivity. We understand from our survey that occupiers are taking extra steps, to achieve the objective of securing employees’ wellness, in addition to following the mandates issued by the central or respective state governments.

“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 minimising 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”, concludes Megha Maan, senior associate director, research, at Colliers international.

 

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