India's office bosses are emphatic – they want the 'old normal' back. At least for the office space real estate industry buffeted by the repeated tailwinds of the pandemic, that is heartening enough.
With most of India Inc having decided to call back employees back to office after one-and-a-half years of work-from-home as well as a hybrid model, office realty is seeing an upshoot. The June to September quarter saw office space transactions, both sale and lease, rising sharply by 168 per cent compared to the corresponding period last year.
The all-India rise year-on-year is a decent enough 12.5 per cent. The hike has been pretty big in all the major markets except Kolkata, which showed a decline. Bengaluru led the way with the IT sector which takes up the max office space, putting up a robust back-to-office momentum. The IT city's year-on-year increase is a massive 273 per cent.
The three other major realty markets with a substantial presence of IT (and financial sector) offices, Chennai, Delhi NCR and Hyderabad, all showed a hike above 100 per cent. This led Rajini Sinha, chief economist and national director of Knight Frank, the real estate consultancy that came out with the findings, to bill that “office realty has made a smart recovery.”
Interestingly, the areas that did the best during the pandemic may just have a hand in now helping out one which suffered the most. The bounceback of office realty is spurred on particularly with two sectors calling employees back to work, recruiting new talent and lapping up fresh office spaces – the IT industry, followed by the banking and financial sector.
It couldn't be better news for the real estate industry, though it may not be so for employees who'd gotten cosy with work-from-home. Office space was the one bright spot even as Indian realty never really recovered from the devastation of 2016's demonetisation. But by 2019, the slowdown in the overall economy put a brake to the rise in office rental rates as well. COVID-19, the national lockdown and the subsequent switch to work-from-home drove it rock bottom.
“But in the last few months, we have seen the pressure decreasing,” said Sinha. Worries about a third wave still leave many things in a flux – for example, rental rates in Mumbai and Chennai are still in the negative space.
While selective 'show up' and flexi-work, if not a hybrid model is still prevalent, realty pundits feel the new 'liberated work environment' is optimistic. “An office space remains the ideal for the basics of engagement, like culture, collaboration and ideation,” argued Viral Desai, executive director (Transactions) with Knight Frank. “I think employers and employees need office space.”