The pandemic has altered the way occupiers and developers had conceived workplaces as the current times warrant increased emphasis on employee wellness initiatives while companies strive to keep business operations afloat. Colliers International recently conducted a survey of occupiers to understand real estate strategies and measures that they are undertaking to survive these exceptional times. Colliers solicited responses from over 70 occupiers operating in the technology, financial services, professional services, engineering & manufacturing, flexible workspaces and healthcare and pharmaceuticals sectors.
“Occupiers are exploring new business models which is forcing landlords and occupiers to adapt to new demands. Therefore, collaboration and transparency between landlords and occupiers will be key. The real estate strategy now looked upon by some occupiers is around building ‘flex and core’ portfolio that includes a flexible office space for medium and long-term lease for core operations. The tech sector has been adopting ‘flex & core’ models quite successfully”, said Sanjay Chatrath, Managing Director, North India at Colliers International.
INSIGHTS & RECOMMENDATIONS
Starting 18 May 2020, we are seeing lockdown restrictions being lifted in a phased manner across cities in India. Hence, occupiers are focusing on health and wellness strategies to manage workplaces.
Gradual return of full employee strength in offices: Occupiers have adopted remote working policies for the majority of employees. Further, we recommend prioritizing a safe work environment as occupiers begin re populating offices gradually.
Redesign of workspaces: Occupiers should revisit their density plans and evaluate options to adhere to social distancing guidelines keeping employee wellness at the core.
Acceleration of technology adoption: We recommend data privacy and effective communication be prioritized in the current virtual office environment. About 60% of occupiers plan to accelerate technology adoption in order to reduce the need for physical business meetings.
Leasing likely to show signs of recovery in H1 2021: We expect de densification coupled with occupiers’ expansion plans to offset the likely decline in leasing activity due to the economic slowdown caused by COVID 19.
TEMPORARY REVERSAL OF WORKPLACE DESIGN
Previously focused on more we space, now focused on more me space
Over the years, commercial office space around the world has witnessed several structural changes in the wake of rising rents and changing occupier preferences, including the adoption of open plan offices replacing previously enclosed cubicles. Workplaces have moved to more we space and less me space. Occupier preferences had moved in favour of more space for collaboration than spaces dedicated to individuals in a pre-COVID world. Occupiers in the technology, flexible workspace, professional services, and engineering and manufacturing sectors have reduced the amount of space per individual in exchange for spaces that promote employee interaction and collaboration.
The current pandemic warrants an increased thrust on health and wellness leading landlords and asset managers to consider several options that help contain the spread of COVID-19. They are now considering de-densification of workplaces, better building ventilation and cleaning, voice or motion activated doors and elevators to reduce the number of points of contact, and anonymous reporting of sickness to help keep occupiers safe and healthy while slowing the spread of germs. To enable a sustainable work-from-home environment, some occupiers are considering giving a one-time home-office allowance to employees for securing necessary equipment and office furniture, stressing the importance of employee wellbeing that in turn enhances employee efficiency.
"De-densification of workplace is the key to unlock benefits in the post COVID era. It helps occupiers to maintain social distancing, enhance the office space wellness criteria, and reduce infrastructure woes of a city. The success of "work from home" model in the IT/ITES sector allows occupiers this flexibility today”, said Arnab Ghosh, National Director, Fitout at Colliers India.
Display of openness by occupiers towards remote working
In India, despite workplaces partially re-opening with the easing of lockdown restrictions following the state government directive, not all companies are marching their employees back to office. Based on the survey, Almost half of the occupiers suggested that only up to 30% of their workforce will return to the office in a phased manner over the next two to three months. Further, 38% of occupiers mentioned that they plan to continue with their remote working plan (or Work From Home) for select workforce at least for the next six to eight months. Occupiers are likely to consider remote working policies to the extent possible while still accepting some degree of risk as they begin re-populating their offices, as minimizing physical interaction is the most effective measure to combat COVID-19.
Occupiers are evaluating their core business functions that require employees to be present at offices, so that they can effectively implement strategies involving rotational shifts and flexible working hours. The survey indicates that about 46% of occupiers plan to resume their business operations with a combination of policies such as flexible work hours and rotational shifts.
Occupiers evaluating de-densification of workplaces by up to 20%
The US Centers for Disease Control and Prevention recommends a social distancing guideline of at least six feet distance between individuals to prevent coronavirus transmission. To prioritize employee health and wellness, occupiers are revisiting their density plans in existing offices and evaluating options to adhere to the new norm. They are considering several measures including doing away with hot desking, repurposing meeting rooms and common meeting places and accelerating adoption of technological tools that enable them to achieve their objective.
The survey states that most occupiers are evaluating lowering workplace density by upto 20% compared to pre COVID situation. As offices begin re populating, there are several tools that enable occupiers a smooth adaptation of the new workplace norms.
These technological tools promote safety by measuring real time occupancy levels along with limiting capacity and triggering notifications when safe occupancy levels are exceeded. 58% of occupiers showed an inclination towards making immediate physical changes to office seating plans when employees return to the office. Further, it may take up to three quarters for occupiers to find their most efficient strategy while reviewing existing office layouts for reconfiguration. However, negotiations for new office spaces should factor in revised space requirements.
‘The unannounced Covid19 crisis and more so the uncertainties around the recovery, in a way has been a blessing to many organisations who have been wanting to bring down their real estate spends by encouraging employees to work from home. Capitalising on this situation, the CXO’s will soon figure out how technology can be induced in their business to ensure team collaboration and productivity, while optimising on real estate spends”, said Rajesh Shetty, Managing Director, Real Estate Management Services, Colliers India.
Expansion plans amidst social distancing norms likely to sustain office leasing
Until the pandemic subsides, we believe the de-densification of workplaces to maintain social distancing will push occupiers to scout for more space. Based on the survey, 25% of occupiers stated that they plan to expand their footprint over the next six to eight months.
It is noteworthy that almost half of these occupiers intend to expand their CRE portfolio by up to 20%, reflecting positive occupier sentiment in the market. Amongst occupiers planning to expand their CRE portfolio in the next 6 8 months, 40% intend to lease new office space, another 5% intend to lease flexible workspace while 12% plan to incorporate a flex and core model.
A flex and core model allows occupiers to secure long term leases with landlords for their core space, and leverage flexible workspace to accommodate additional employees for on demand, short term project space or otherwise, while allowing access to amenities such as lounges and meeting rooms.
The team at Colliers believes that occupiers’ expansion strategies coupled with social distancing norms stressing de-densification will lead to increased office absorption over the next six to eight months. This should offset the decline in demand for office space likely to occur due to the economic slowdown caused by COVID 19. We expect occupiers to offer flexibility to employees; however, office absorption will likely be robust and the sector should start showing signs of recovery in H1 2021.
“The pandemic has altered the way occupiers and developers had conceived workplaces as the current times warrant increased emphasis on employee wellness initiatives while companies strive to keep business operations afloat. As occupiers begin implementing strategies with the objective of minimizing physical interaction, Colliers expects de-densification coupled with their expansion plans to augur well for the leasing activity leading the sector to show signs of recovery by 2021”, says Megha Maan, Senior Associate Director, Research at Colliers international.