A recent survey revealed that 83 percent of employees favoured a hybrid work model that allows remote working up to 75 percent
According to India Ratings and Research (Ind-Ra), up to 40 percent of annual demand for India’s office space market can be shaved off due to work-from-home culture and reduction in fresh leasing activities, reported ET Realty.com.
The agency mentioned that the negative demand for office space can increase more than 500 basis points in vacancy levels over FY21 to FY23. It said, “The impact on upcoming office space providers is likely to be particularly sharp as these may struggle to let out their upcoming properties.”
A recent survey by Accenture revealed that almost 83 percent of employees prefer a hybrid work model with the ability to work remotely 25 to 75 percent of the time.
Ind-Ra said this transition to remote working may induce companies to use a hot-desking policy where the same desk is shared by multiple employees who report to work on different days.
Consequently, if 2.5 percent of employees are to work on alternate days and use the hot-desking policy, there may be a net 1.25 percent reduction in office space required in India – a serious hamper to office real estate.
Seeing that there are 635 million square feet of office space occupied in the top eight cities of India at FYE20, it will result in a negative demand of 7.9 million square feet or 21 percent of the average annual demand seen during FY19 to FY20.
“A larger impact of hot desking might shave off several years of demand in the short run and create significant hardships for office real estate providers,” said Ind-Ra.
In addition, numerous international companies have announced hybrid work models where employees are required to report to work only a few days of the week. This leads Ind-ra to assume that the implementation of the hot desking model may be higher than the envisaged 2.5 percent.
Occupancy at a large real estate investment trust (REIT) focusing on office portfolio declined to 86.8 percent from 92.2 percent in Q1 FY21, said Ind-Ra. Another listed REIT’s occupancy also dropped to 81.8 percent from 87.1 percent in Q2 FY21.
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