With India’s Covid vaccination coverage expanding, office spaces are getting populated again, and 2022 promises to be better year than 2021, Embassy Office Parks REIT deputy-CEO & chief operating officer Vikaash Khdloya said. Occupancy will grow to 15-20% by December-end in the current calendar year, he added. In a wide-ranging interview with FE’s Rishi Ranjan Kala, Khdloya stressed that employers are planning some degree of flexibility to make workers’ return to office easier. Excerpts:
What prospects do you foresee for the office space leasing industry?
Corporates are looking at high quality office products to motivate their employees to come back to work. This will help companies like ours. All of this has meant that there has been a clear uptick in leasing activity on the ground. We have seen site visits and lease inquiries increased by 66% this quarter (Q2 FY22 vs Q1 FY22). We believe that office space demand will rebound strongly in 2022. The number of inquiries have increased. Bangalore, our core market, accounts for 56% of the total 26 million sq ft (MSF) of RFPs, the open inquiries in the market. Bangalore will lead India’s office recovery.
What drives your optimism about the segment’s revival?
Vaccinations are increasing and the back to office trend is picking up. It is expected to pick up from 10% now (people working from office parks) to 15-20% by the end of this year. Our core customer base, which is the technology sector, is doing very well, given the record earnings and hiring pipeline as world moves towards technology spend and digital transformation. Global captive centres (GCCs) are also bullish on India. A recent Nasscom report says that about 500 new captives, roughly one-third of today’s size, are expected to come in next four years, which is huge. This means around 35% of today’s GCC strength, which came over so many years.
What is the sense you are getting from clients during lease negotiations?
Talking about ground fundamentals, we have really seen early signs of revival. There is pent up demand, as for six quarters no decisions were taken. There is record technology spend globally and there is a strong hiring trend and GCCs are increasing. Active RFPs at 26 MSF is a pretty healthy number. Sentiments are positive. Return to work is now anticipated to rise to 15-20%. We are very positive about a strong rebound in demand for 2022.
How is the return to office process for enterprises working out?
With increasing vaccination numbers and declining active Covid cases and deaths, it is definitely boosting the return to office sentiment. We have seen a gradual ramp up. Many corporates are encouraging employees to return to base locations. We believe it will ramp up pretty quickly. As of September-end, the back to office numbers are anywhere between 27-40% from Canada, Europe, US and Asia Pacific, and they are increasing. So we really think the numbers in India will go up and the trends in India points in that direction.
How is the hybrid working culture developing?
There is a very clear message coming from leadership of multiple companies that they want their people back in offices. Of course, an optimal balance of work from home (WFH) and work from office (WFO) will evolve over time. But it is clear that there will be some flexibility in working. But this will be more than offset by massive growth in hiring and de-densification. Besides, even with the hybrid model, more space would be required for collaboration, leisure, amenities and wellness. And when corporate leaders want their employees to come back to office, they will have them (offices) in great locations. So return to work, de-densification and hiring will help us get more demand.
What is your take on collaboration with flex space operators?
Co-working spaces provides a certain amount of flexibility to certain kinds of occupiers for a short period of time, and some corporates are exploring this model as it is capital light, before they take a call on their medium term real estate strategy. But our philosophy on co-working is that it is an amenity for a business park and as long as we have a certain amount of co-working spaces in our business parks, whether it is owned by us or others, it helps our occupiers. We have targeted and have some co-working operators in our business parks. The total co-working across our entire portfolio of 32.3 MSF is around 2%. It is more for us like an amenity. We do not intend to get into the co-working business.