by Salai Kumaran, CEO, IndiaLand Group
Work from Home (WFH) or "Flexi Working" emerged as a refreshing concept during the pandemic and has since transformed the traditional work model. Even today it remains dominant in the Indian IT and ITES sectors. Interestingly, the demand for WFH surges during the festive season, when employees want to spend more time with their families without hampering their work. This seasonal shift is more noticeable in today’s workforce, underscoring how hybrid work has become a key part of the modern workforce dynamics.
Historically, people have worked from their home or nearby. However, the Industrial Revolution in the 19th century marked a significant shift. During that phase, workers began moving from villages to factories, changing the traditional domiciled working system. Meanwhile, the early 20th century saw the rise of common office spaces, driven by the need for collaborative work environments.
It was the 21st century, particularly post-2010s when the Indian IT/ITES sector began adopting WFH to enhance employee comfort and reduce attrition rates. However, during the pandemic, WFH became a necessity for business continuity. During the initial phases of the pandemic, the IT/ITES companies achieved 70-85% productivity levels. Since then several trends have been reshaping India’s $40.71 Bn commercial real estate.
Post-pandemic trends and challenges
As the pandemic slowed and companies expected the employees to return to the office in 2022, new dimensions and challenges emerged. Many employees resorted to moonlighting (multiple employment at a single time) to earn more money and were hesitant to lose the comfort of WFH. The traffic congestion in metro cities added to the resistance to returning to the office. Furthermore, the festive season often exacerbated this resistance, as more employees sought flexible work options during festivals.
The industry had to come up with software solutions to combat moonlighting and gain better control of operations. However, with time, they established that employees in the IT/ITES industry prefer the flexibility and comfort of WFH. In response, companies began to re-evaluate their strategies and make returning to the office more attractive through measures like hybrid models where employees are required to come to the office on alternative days.
To make the workspace more attractive, companies enhanced office interiors with modern designs. They are designing collaborative spaces to encourage team interactions, while flexible working hours during the festive season and seating arrangements, such as hot desks, are becoming standard. These features, along with hybrid models, were implemented to incentivize employees to return to the office. While these adjustments have helped companies balance the comfort of WFH with the need to maintain a physical office presence, the initial response weaned out slowly.
Impact on commercial real estate
The shift to WFH has had a notable impact on the commercial real estate market. To begin with, companies capitalized on the opportunity to reduce their real estate and transportation costs, which typically amounted to an estimated 3-5% of their turnover. However, this trend of space cancellations by Indian and multinational companies posed new challenges for developers who had to adjust their strategies to meet the changing demand.
The pandemic forced the rapid adoption of WFH models, providing continuity to businesses, particularly in the Indian IT/ITES sector. This increased international credibility for Indian operations, leading to tremendous growth in the IT/ITES industry between 2020 and 2024. Despite the early setbacks caused by the pandemic, the IT/ITES sector grew at a CAGR of 7.8% between 2019 and 2024, reflecting strong resilience.
On the other hand, the demand for office real estate declined significantly. For instance, in 2020, a drop of 15% was recorded as companies embraced the WFH model and vacated spaces. However, the market rebounded with a 10% increase in 2021, 12% in 2022, and an 8% rise in 2024.
In a nutshell, the WFH model has become an inevitable part of the work culture, which focuses on continuity, work-life balance, and addressing various constraints, including those presented by festivals. Judging by the trends, it seems unavoidable that 25% to 30% of the employees at the bottom of the ladder, particularly jobs like programmers, call centre operators, and IT support services, will remain partly or fully in the WFH setup. Some companies were able to double their headcounts by accepting this new normal. However, this shift also raises concerns about data safety, cultural implications, and the psychological well-being of employees, for which the industry is working on various solutions. While the new normal offers numerous benefits, it poses challenges for the commercial real estate sector. This is because it is feared that the growth rate of space take-off will be less proportional to the industry’s growth rate due to partial WFH in this industry.