While the Coronavirus could result in some delayed decision making, there should be no significant adverse impact on office absorption in 2020, says a report by Colliers International India
While India has been less affected by the Novel Coronavirus (COVID‐19) than east Asia, since March 2, 2020, the virus has been spreading in the country. This situation highlights the importance of wellness and technology in the workplace. In its latest report ‘COVID-19: Impact on India Real Estate’, Colliers India Research has some key recommendations for occupiers and landlords. “We expect India’s economy, which has slowed but is still robust, to underpin office leasing demand.
While there could be some delayed decision making, there should be no significant adverse impact on office absorption in 2020 as pre‐commitments should mature this year with the completion of new buildings. We recommend occupiers to consider a flex and core strategy for their workplaces and if required, even split office operations,” said Sankey Prasad, managing director and chairman at Colliers International India. Megha Maan, senior associate director – research, at Colliers India, further added, “We advise companies to review business continuity plans, in preparation for further spread of the virus. Occupiers should identify key technologies that can support and elevate health and wellness of their employees in the organisation. If the outbreak continues, it could lead to the biggest remote working experiment ever seen in India.”
In 2020, Colliers Research forecasts 54.3 million sq ft (50.4 million sq metres) of gross absorption and does not foresee any major impact on office demand due to COVID‐19. However, we expect some delayed decision making by occupiers who depend on clearances from overseas, especially Asia. We foresee occupancy in flexible workspaces to stay muted in March 2020, especially in Delhi‐NCR, as several start‐ups encourage employees to work from home.
Colliers believes that the current scenario in India warrants greater stress on wellness and hygiene in the workplace and we advise companies to review business continuity plans in preparation for further spread of the virus. We believe this is a good opportunity for occupiers in India to prepare and implement remote working policies. We recommend occupiers to accelerate the adoption of technology and clarify their cloud strategy, to lessen the shocks from the abrupt switch to remote working.
In 2019, institutional investments from Singapore, Hong Kong and mainland China together accounted for 28% of total real estate investment in India. At a time when funds from Asia are increasingly looking towards India’s Grade A office assets, we expect investors will remain bullish over the next five years. However, we foresee slower decision‐making in H1 2020, which could constrain capital deployment in India.
India is among the top 15 most-affected economies, as China is its second‐largest trading partner, accounting for about 13.7% of imports in 2018. Precision instruments, machinery, automotive and communication equipment are the sectors that are most likely to be affected. This will likely have a moderate effect on office leasing demand in Q1. If the outbreak is contained in H2 2020, we expect to see some recovery over Q3 2020. As demand for e‐commerce increases, as people avoid shopping centers, we recommend manufacturers to prioritise efficient inventory management and last‐mile delivery for warehouses.
We expect the travel and tourism industry to see significant effects from the COVID‐19 outbreak, not only due to the probable decline in inbound tourism, but to declining domestic travel too. Since India has a high population density, we believe this will also adversely impact upcoming holiday plans, reducing occupancy levels in hotels, as well as retail footfall and sales, particularly in malls.
How will the Coronavirus affect the office sector?
In the office space segment, the demand for flexible workspaces is likely to be affected in Q1 CY2020, especially in cities affected by the Coronavirus, as start‐ups encourage employees to work from home.
Which real estate segment is likely to be most affected by the Coronavirus?
The Coronavirus is likely to affect the travel and tourism industry and the retail sector, resulting in lower occupancy in hotels and reduced footfalls in malls.