This, however, is expected to emerge as a mitigating factor for decline demand and absorption of commercial properties in the backdrop of Covid19 pandemic and acceptance to work-from-home (WFH) model.
“Although WFH has become the need of the hour, it has been receiving mixed responses in some sectors with several participants highlighting challenges pertaining to productivity, security, confidentiality, and availability of devices and internet,” said Rahul Prithiani, Director, CRISIL Research.
However, he also added, the economic impact of the pandemic may result in corporates rationalizing operational expenses across departments, including lease rents. If WFH trends continue to gather momentum, they could weigh heavily on vacancy levels.
In the short term, or at least until a vaccine is available, increased social distancing norms–more square foot per employee–will lead to 20-50% of employees across sectors getting displaced.
While companies may not take up additional office space in the current scenario, they will most likely utilize their existing office space in light of employee health and safety measures. This will ensure existing vacancy levels in grade A office spaces across cities remain range-bound.
CRISIL highlighted another important factor of the lock-in clause of the rent agreement. If companies are within their lock-in phase, there is less likelihood of downsizing of office space requirements. These factors, along with limited fresh supply, will help allay the impact of WFH to an extent.