The outbreak of the coronavirus disease will have a short-term impact on India's office market, with demand likely to fall 45 per cent, said C&W Managing Director (India and Southeast Asia) Anshul Jain.
The net leasing or absorption of office space might fall to 25 million sq ft this year across eight major cities as against 45 million sq ft during 2019, he said.
Jain was speaking at a webinar organised by Workplace Trends India founder Tushar Mittal, who also heads interior design firm SKV.
The other speaker at the webinar was Chris Browne, managing director and head of global occupier services (Asia Pacific) at C&W, Workplace Trends India said in a statement.
"The commercial real estate rental situation at present is very different from the global financial crisis situation of 2008-09, when the supply outstripped demand. We were in an oversupplied situation then, right now we are not in an oversupply situation.
"Having said that, there will be short-term softness in the market and I think the rentals may come down in some pockets between 5 and 10 per cent," Jain said.
Notwithstanding a likely fall in demand, supply and rentals of office space this year, he expressed confidence that the office market in India would grow in a medium-to-long term.
The de-densification of office space would largely compensate for any fall in demand because of adoption of work from home (WFH) policy by corporates, the consultant added.
Stating that the fundamentals of the Indian economy remain intact, Jain said India might gain eventually and attract more outsourcing jobs because of stagnation or fall in wages and salaries, and dollar appreciation.
"I think our fundamentals are still in place, the factor advantage in terms of young working population, english speaking and top of it, skill set is increasing very significantly.
"Besides that, chances are that even in 2021 or 2022, we will be at 2019 wage levels, because there has been no wage growth this year. Instead, there is a wage deflation this year," he said.
Explaining further, Jain said, "If I am a BPO (business process outsourcing executive), in 2022, my wages will be at 2019 level. In real terms, there is a big saving. My rentals are 5 to 10 per cent less and the dollar has appreciated by 10 per cent. So, my cost advantage for India becomes huge. So, I think medium-term prospects for India remain very strong."
Echoing Jain's views, Browne said India could benefit from this pandemic due to cost pressure in other countries.
"I work for MNCs (multinational companies) and most of the clients are western MNCs and they all have a presence in India. I think with the cost pressure they are facing, they are looking for alternative solutions.
"With the quality and amount of talent in India as well as improvement in infrastructure, I think this is going to mitigate some or the other financial impacts on sectors like real estate. So, I see key markets like India as a beneficiary," Browne said.
On the WFH policy, Jain said the companies would certainly give more flexibility to employees. "Work from home will gain strength, but that may be just 10-15 per cent of the workforce."
Workplace Trends is a platform for industry professionals and leaders on emerging workplace trends world over. MJH HRS