Can WFH concerns over comfort revive commercial real estate?Real estate developers and select equity analysts believe that the initial euphoria about improved productivity from work from home (WFH) has ebbed and has now triggered concerns over employee burnout, organizational culture and team bonding.

A survey conducted by Knight Frank also showed that 90 per cent of employees in the country miss their office environment while working from home. This makes a case to look for commercial real estate players which may benefit from the recovery of office leasing market in India.

Edelweiss Securities believes that WFH will supplement offices but will not be a substitute in the long run. The brokerage is bullish on realty players with robust office portfolios including DLF and Brigade Enterprises.

Shares of DLF and Brigade Enterprises have rallied 12 per cent and 20 per cent, respectively, since April 1, while BSE Real Estate index has gained 25 per cent during the same period.

According to industry watchers, Covid-19 pandemic has impacted the overall business sentiment but demand for office space will revive as India slowly comes out of lockdown mode.

“There will be a demand bounce back. Currently, things are moving slowly but maybe next year, we will see the momentum picking up,” Vinod Rohira, CEO, Mindspace Business Parks REIT, said during a virtual real estate summit organised by CII.

Market mavens have observed that employees appreciate the enhanced flexibility and savings in commute time due to WFH. However, they are facing a host of other issues which includes lack of human interaction. The blurring of personal and professional lives has also led to a feeling of burnout as work-life balance has gone awry. Even Infosys co-founder N R Narayana Murthy on Monday said he is not a ‘great fan’ of WFH.

A report by the National Bureau of Economic Research in the US also found that WFH days are 48 minutes longer with more meetings to attend and emails to answer.

Some of the concerns which are highlighted in a survey conducted by Knight Frank with employees of tech companies in India include the problem for working parents who have to balance their work commitments with childcare and homeschooling.

On the other hand, singles are facing issues of loneliness which is leading to mental health risks. A sedentary lifestyle is also taking a toll on physical health and well-being of employees.

Lack of space at home due to sharing of the place with family or roommates, infrastructure issues like low bandwidth, power outages and worries over data privacy are among other major concerns of employees and corporates.

Anuj Puri, Chairman, ANAROCK Property Consultants, said, “We are gradually seeing demand for commercial spaces pick up in key cities. The shortcomings of the WFH culture have also been exposed, and a lot of employees are now coming back to their offices. Mumbai and Delhi-NCR are seeing more employee footfalls than Bengaluru, Hyderabad and Pune.”

He further added that many companies will continue WFH model only for a certain percentage of their workforce, and will have to de-densify their office spaces for the employees who cannot WFH. This is because companies must now adhere to the new social distancing norms. From 80 sq ft space per employee, it is being increased to 120-130 sq ft per employee.

Some reports also suggested that leasing demand in the global market has already picked up including from tech giants like FAANG, which were at the forefront of WFH. In the latest commercial property update in India, Google is set to pick up over 2 million square feet of commercial space in Hyderabad.

Edelweiss Securities highlighted that leasing activity in China has picked up in April-June after a sharp decline during January-March due to the pandemic. This indicates that concerns over WFH leading to a collapse in office demand could be unfounded.

On the other hand, residential-focussed real estate companies have outperformed commercial players since the beginning of the ongoing financial year. Shares of Sobha, Godrej Properties, Oberoi Realty, Prestige Estate and Sunteck Realty have gained between 27 and 60 per cent during the past six months.

Commenting on the sector, Nilesh Shah, MD and CEO, Envision Capital, told ET NOW that commercial real estate sector is probably the last place to be in now. “Work from home is now becoming an accepted kind of practice. Commercial real estate is going to face significant headwinds going forward,” he added.





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