In the last five months, a new world order has emerged wherein work from home has become the norm which is unlikely to end anytime soon. What is the current scenario of commercial real estate in India? When is the market going to bounce back?
The pandemic-induced lockdown brought India’s economy to a halt, this directly impacted workspaces. Work from home (WFH) came up as an alternative, and the initial months witnessed doomsday predictions for the future of office spaces. However, not all work profiles can adjust to WFH. Then, some industries have issues with secure networking and hacking of data from staff connecting to organization networks while working from home.
So, demand for work spaces will see some course correction – social distancing and COVID norms will mean changes in how offices are configured, but this segment should do well in the long term. Commercial real estate demand grows in sync with GDP growth, so as the economy recovers, demand for commercial real estate will also post higher demand.
Lifestyle related commercial real estate will bear the maximum brunt - the ‘touch and feel’ retail format will see changes based on COVID safety norms, while the social distancing aspect will change spectator sports, entertainment and F&B formats.
The positive side will be warehousing and logistics as also data centers, which are already witnessing high demand, and should do exceedingly well, but there is a rider – these segments will be a volume game. For logistics and warehousing, large size, specialization and cold chain will be the main drivers, and will require huge investment. Similarly, data centres - so, we most likely will see big players doing well in both these segments. What is also likely is that the need for large capex will lead to consolidation, this will spread across all segments in Indian Real Estate.
With the labour force back in their hometown due to Covid-19 and not expected to be back soon. How are you planning to complete your unfinished projects?
It is not the entire labour force that migrated back to their villages; local labour is available. This coupled with increasing usage of technology has reduced need for labour, so at construction sites, things are working at 40 to 55 per cent capacity. There are indications that migrant labour wants to return back, we might see a return to ‘full site operational and working’ scenario by the time the festive season starts – latest by the new year.
What are the technologies you will be deploying for faster completion of commercial projects?
Human interface on construction sites has been reduced over the years. From a time when concrete was mixed at site, we now have ready mix concrete being delivered to sites where construction cranes reduce the need for a large number of labour to carry construction material to floors where construction is happening. Pre-cast and pre-fab sections are time savers as also require lesser numbers of labour on site. So, there are ways and means to speed up the work as also reduce quantum of labour necessary at construction sites, within parameters as are allowed and following COVID-19 guidelines, real estate projects – including commercial - are witnessing ‘work in progress’ with quicker completion each floor’s construction as also lesser time taken for finishing. We prefer to use the term, ‘smart project management’ rather than mention Artificial Intelligence (AI), Augmented Reality (AR), the Internet of Things (IoT) among different technologies as being deployed for faster completion of commercial projects.
Sales of commercial properties are at any all-time low. What are the various schemes you have launched or are coming up to make a property purchase a win-win situation for both? Any tie-ups for the same with Banks and NFDCs?
It is GDP growth which drives demand for commercial real estate, so as India’s economy recovers from the negatives of the pandemic induced lockdowns, we should see demand returning in some segments of commercial real estate. Overall, the scenario is similar to the name of a Classic western movie – the Good, the Bad and the Ugly. Commercial properties are doing well in some segments since the series of ‘unlock India’ started, some segments should break even over a longer time frame and in other segments, will have to reinvent to keep pace with the changed scenario.
So, warehousing, logistics, light industrial parks and data centers are and will continue to do ‘good’. Some sectors, like retail, hospitality, F&B, entertainment and event management are facing some of the toughest challenges, and indications are that they may take longer to recover – and will probably need to reinvent the working model. The question mark is about fairly recent segments, like co-working spaces – these may need a total rethink based on each location/ micro-market, and factoring in potential demand is extremely challenging at this point in time. It is all about waiting for the GDP to grow, demand for some segments of commercial real estate will be back to near normalcy.
The fear of contracting Covid-19 is holding back employees from re-joining offices. How can an environment be created to allay the fears of the employee?
It is about post-COVID-19 ‘near-normalcy’ becoming the new normal. How an organization empowers employees to return to the workplace is simple: one follows and implements all norms, guidelines and restrictions to the fullest, ensuring a safe and secure working environment. One of the biggest positive factors is that compared to the situation in March, the situation is far better when it comes to the medical infrastructure to treat patients, plus the recovery rates are improving. So, with proper implementation of safety norms and use of protective gear, some organizations are seeing partial resumption of ‘work from office’, some are already working the entire week from the office. The real challenge in cities like Mumbai is pubic transport, with local trains not open for all. I see ‘Herd Immunity’, as we have seen in Mumbai and Delhi, hopefully seeing India back to normalcy within a few months. If we get a vaccine over the next few weeks, the positivity which it will generate should see even faster return to ‘work as usual’ – and, we may even end up doing better than just before the COVID-19 pandemic struck.
In your upcoming projects and completed projects are you re-doing office space in conformation to social distancing and bring in technologies for prevention, identification and elimination of viruses? If yes, please elaborate
The new normal in the post-COVD-19 world is about office spaces following norms which maintain safety and security vis-à-vis all aspects of COVID-19. It is a long list, and each and every point is being implemented in new projects; while completed projects are being restructured and reengineered to meet all requirements of the ‘new normal’ in the post-COVID-19 world. It is about ensuring safety and security in the work environment, and we are duty bound to fellow human beings to ensure each and every aspect is implemented as also followed in letter and spirit.
Will it be an end for co-working space or will it emerge stronger? Which are the sub-sectors that are expected to perform better?
The basic premise of co-working spaces was that it did away with long term rental or ownership when it came to using work spaces purely as per requirements. In the post-COVID-19 world, following proper norms and guidelines if due safety essentials - including social distancing - are followed, there is no reason why users would not return. Will they, is the million dollar question. As of now, it is difficult to predict the outcome, but aspects like herd immunity as also developing of a vaccine will play a major role in getting users of co-working spaces to return. So, it is a wait and watch scenario, one hopes for the best.
What is your take on warehousing & logistic, data centres and industrial parks? How will they shape up in the future?
These segments have been the positive aspect of commercial real estate during the lockdowns as also during the series of ‘unlock India’. Light industrial, warehousing and logistics parks as also data centers are already witnessing high demand, and should do exceedingly well, going ahead. Growth in these segments is going to be a volume game for real estate developers. For logistics and warehousing, aspects like large size, specialization and cold chains will be the main drivers, and will call for huge investment. It will be a similar situation with data centres - so, most likely, we will see big players doing well in both these segments. What is also likely is that the need for large capex will lead to consolidation among real estate developers in these segments, and this is a trend which will spread across all segments in Indian Real estate.