Hybrid work is the new normal in India: What this means for commercial real estate

NEW DELHI: The covid-19 pandemic has led to realisation that India's commercial office segment will never be the same again. Most corporates and employees have recognised the benefits of remote working. While it is surreal to think that traditional offices will completely disappear, it is likely that the hybrid office model will become the new normal.
A hybrid office consists of some employees who work in the office, while others work from home.Some workers will remain in office to do their jobs, while some prefer to work in the office, and others still might be required to go into the office on occasion. Employees can work in different spaces, including corporate offices, coworking spaces, public spaces and from home.
According to a report titled ‘The Future is Flex’, property advisory CBRE South Asia estimated India’s flexible office spaces to expand 10-15% year-on-year during the next three years, and Tier 1 and 2 cities will drive this flexible space industry.
With pandemic-induced uncertainties several large corporates are looking at opting out of long-term leases, which is why companies like 3M. Welspun and Starbucks have moved their Indian HQ to co-working locations in order to optimise costs. A co-working space allows companies to not commit huge capital expenditure to commercial real estate.
Colliers International expects flexible workspace operators to lease 3 million square feet of space across the top six Indian cities this year.
"Initially, the growth of co-working spaces was limited to the top 6 cities. However, post-pandemic, operators are expanding into tier-II cities. Now we are seeing large enterprises setting up satellite and sales offices in smaller cities. Moreover, hyper-local delivery players are taking up small office spaces in multiple locations as they are expanding in smaller cities. We expect this trend to continue and demand from e-commerce and fintech to rise in the next two years. Many of these existing centres are currently operating at more than 70% occupancy levels," said Ramesh Nair, Chief Executive Officer, India and Managing Director, Market Development, Asia, Colliers.
However, while many corporates were initially enthusiastic about work from home, it is no longer the most preferred mode of work due to employee burnout, organisation culture and team bonding concerns. Employees started facing problems regarding collaboration, mentorship, interactions and personal attention. Loneliness and mental health became major risks. A recent study by LinkedIn revealed that the majority (7 out of 10) young Indian professions think fully remote work would negatively impact career growth. 55% felt handicapped by the lack of sufficient opportunities for professional learning due to “less face-time with bosses and leaders” and “it gets harder to learn from peers remotely” (34%).
Nearly half of India’s workforce is keen on being back in the cubicle, as they consider a workplace setting more conducive for productive work, while 9 in 10 (86%) respondents think a hybrid work model positively impacts work-life balance.
By the beginning of 2022, Wipro is embracing the hybrid model and calling back employees. Marico, one of India’s leading FMCG companies, also plans to enforce the hybrid model. Google too is adopting the “hybrid workplace where in around 60 per cent of the employees would come together in the office a few days every week, another 20 per cent would work in different office locations, and the remaining 20 per cent would work from home. Employees will also have “work-from-anywhere weeks”. "Googlers will be able to temporarily work from a location other than their main office for up to four weeks per year, with manager approval."
The Microsoft Work Trend Index revealed the Hybrid Paradox: People want the flexibility to work from anywhere, but they simultaneously crave more in-person connection. "Companies will need to actively build new habits and ensure that no matter where employees work, they feel like they belong, that they’re being included in conversations, and that managers support their diverse needs and work styles. This holds especially true for underrepresented groups across the U.S. workforce as a whole, who feel less included than others."
The second half of 2021 is already seeing a change in the way co-working companies operate, and new age commercial spaces need to focus on = in-person collaboration and in-office flexibility. The key is to create floor plans that are open, but also offer more of an enclosed space.
As per Cushman & Wakefield, leasing of flexible workspace by corporates rose 73% in the first half of calendar year 2021 to 31,538 seats, which is nearly 87% of the seats leased during the same period a year ago. Commerical real estate projects by the top eight players in India indicate that they are looking at 7-8 million square feet of space being added by the co-working industry in just one year, said Aditya Narain, analyst at Edelweiss Securities Limited.
As of June 30, 2021, the total flexible workspace stock in India stood at 30.7 million square feet. Given the continued effects of Covid-19, Colliers forecast flexible workspaces to lease around 3 million square feet (0.27 million square meters) in 2021. As occupiers and their employees return to formal workspaces, the demand is expected to increase for well-located, high quality and efficient flexible workspaces resulting in their occupying 4.7% of the total commercial office stock by 2022, the report said.
"With the pandemic-induced volatility playing havoc, many start-ups as well as large enterprises are evaluating flexible workspaces to meet their space needs over the next couple of years. We believe a combination of flexibility and capital conservation provided by the segment is particularly useful in an uncertain world. Driven by a need to defer capex and to try the hub-and-spoke model, many corporates are considering flexible workspaces. As a result, flexible space operators are likely to witness good demand going ahead," added Narain.