Rent – yielding Assets may No Longer be the Cash Cow for the Realty Cos

Sir, l DO NOT AGREE WITH YOUR FINDINGS AT ALL and see them as a knee jerk reaction to the prevailing circumstances where the industry is going through pain because of the unprecedented pandemic. Let me take you back into the calendar year 2019 – Commercial office space absorption was at an all-time high of about 47 million sqr ft. Year 2020 also started on a bullish note but we are hurdled by this disruption which has forced us to follow WORK FROM HOME.

WORK FROM HOME doesn’t augur well with IT/ITeS for:

1. High-Speed Internet – Broadband is still not available at all homes
2. Data Protection – the multinationals and other corporates cannot risk data leakage
3. We cannot create all support infrastructure like Printers, Plotters and other tools required for day – to – day operations
4. Operational hurdles – the workforce is in middle ages and live in small apartments in metros in 1-1/2 or 2-bedroom apartments which are used by the couple and small children. Too much disturbance and distraction for concentrated work. The time zone of work is also different which causes inconvenience for other members of the family. In short, there is no work atmosphere at home
5. Logistical Problems – The Servers and other hardware need to be well protected in office.

There are many more reasons why WORK FROM HOME doesn’t work. Since the current situation demands us to Stay Safe at Home the workforce is adjusting at the moment but this is not a permanent solution at all.

I agree that rentals will be renegotiated and new office space may not be absorbed to the expected volume, but with India projected to grow at 7.4% (IMF Projection for 2021) commercial office space will be first to bounce back. The demand will fuel up the rentals and we will see same rental yield as we saw in 2019.

Small blip, but a big opportunity for all times to come for commercial realty players.

Disclaimer: Content and opinion expressed here are solely mines and stems from my experience and observations in the real estate industry.