MUMBAI COMMERCIAL REALTY: DEMAND & INVESTMENTS
COMMERCIAL REAL ESTATE DEVELOPERS AND CONSULTANTS SHARED THEIR PLATFORM TO OFFER INSIGHTS ON THE IMPACT OF COVID-19 AND APPREHENSION AROUND WHAT’S GOING TO HAPPEN WITH THE EXISTING COMMERCIAL REAL ESTATE SPACE Neeraj Bansal, Partner & COO, India Global & Head Corridors (ASEAN, HK), KPMG in India was of the view that Covid-19 has transformed from a health crisis to an economic crisis across countries. “In India, almost all industries and sector have been adversely impacted and hit by an economic slowdown. Prior to Covid, India's commercial realty space was witnessing a very strong demand especially the Co-working segment. The Co-working realty across the seven top cities had reached a whopping 12 million sqft in 2019.” Giving the sense of current scenario, Ravi Ahuja, Head – Commercial Business, L&T Realty added, "With over 45 million square feet of absorption across the top 9 cities of India in 2019 the expected drop due to the pandemic has been about 45% to 50%. Mumbai office space absorption close to 25.8 million square feet in 2019 has seen a drop of 25%. Presently, the top demand drivers for organisations are cost optimisation and flexibility to survive the next 6 to 9 months. Clearly corporates are in an assessment mode and majority of them are following work from home policy However, work from home is now slowly converting to ‘work near home’ which is more practical and will drive the demand for flexi-workspaces.” Changing working practices are not the only determining factor. Inevitably there will be a reduction in occupier demand, though it will vary from sector to sector. Sunny Bijlani, Joint Managing Director, Supreme Universal agreed that there are a lot of opportunities for commercial Grade-A office spaces near residential hubs. “Outside CBD, there are a very few Grade A commercial spaces supply. Going forward, due to remote working and social distancing, people will need smaller office hubs near homes. It will also save on travelling time of employees. I feel this is a great opportunity to re-think commercial development and create business hubs within a residential development." Chennai, Kolkata, NCR and Mumbai recorded relatively better recovery in transactions in Q3 2020 compared to the other markets. While in Q3 2020, transactions in Bengaluru reached 30% of 2019 quarterly average level, the market still experienced the highest transaction at 1.1 mn sq ft and rent growth at 4% YoY. Ahmedabad was the only market to see office completions exceeding transactions during Q3 2020, causing rents to fall by a substantial 5% YoY. Providing a legal stand point and explaining the much talked about topic during the entire pandemic crisis, Force Majeure, Vivek Chandy, Joint Managing Partner, J. Sagar Associates (JSA) elaborated, “As soon as covid-19 struck about 80% of occupiers sent notices that it is a force majeure situation and rents need to be suspended. But the law is very clear that a lease is an executed contract where there is nothing left to be done by the lessor. The lease cannot be terminated especially in cases where there were lock-ins. However based on relationships and mutual understanding many lessors’ suspended rents or reduced rents for some period of time. However Delhi High Court made it very clear that commercial difficulty does not amount to frustration of a contract. Unless the premises are substantially destroyed you cannot say that the lease has come to an end. Also, co-working spaces do not provide lease, they execute service agreements which can be terminated. Thus, many people who had taken space in coworking spaces could terminate their agreements." CO-WORKING TO COME OUT ON TOP Ambar Maheshwari, CEO, Indiabulls Asset Management offered another perspective, “The hub and spoke model sounds good in theory, but think of Covid as a black swan event that is rare. Work from home is temporary arrangement and people are still evaluating how things are going to work out going forward. I don't believe that the industry is going to go through a very substantial change with a huge number of commercial spaces coming up in suburbs. Coworking already exists as a solution for remote working while, CBD will remain hub for offices.” Representing the co-working industry Amit Ramani, Founder & CEO, Awfis Space Solutions Private Limited shared "Remote working and coworking are both here to stay and in the new normal the commercial real estate sector will be driven by the employers - looking for cost saving and employees - looking for flexibility. The paradigm shift will be that what used to be an 80% collaborative workspace will now become 50% individual work space and 50% collaborative workspace. The structured work environment will continue. In my opinion the density will change, not the size of the desk." The experts were in agreement that there might not be a major change to the developer’s commercial real estate strategy in the short term. In the long term, companies will explore expansion through multiple small offices or Co-working spaces rather than just having one big commercial office in CBD.
Tags : FEATURES ARTICLE Developers Mumbai Real Estate Indiabulls Co-working commercial COVID-19 Neeraj Bansal Commercial Realty L&T Realty KPMG ASEAN HK) Ravi Ahuja Sunny Bijlani Supreme Universal Vivek Chandy J. Sagar Associates (JSA) Ambar Maheshwari Amit Ramani Awfis Space Solutions Private Limited