As one of the world's leading economies, India is expected to contribute about 15% of the global growth this year, according to the IMF. The office sector plays a crucial role in this growth, as it reflects the economic activity, innovation, and competitiveness of the country. However, the office sector is also facing a major transformation, as the needs and preferences of the tenants, especially the large and/or multinational ones, are changing and evolving rapidly. These changes are influenced by various factors, such as fast growth, talent acquisition, employee commute, modern amenities, COVID-19 pandemic, climate change, and safety and security. In this article, we will examine some of these factors in detail.
One of the main challenges faced by tenants is the need to attract and retain high quality and technologically savvy professionals. As the global competition for talent intensifies, tenants need to attract and retain the best talent in their fields. This requires office buildings that can provide a conducive and stimulating work environment that enhances productivity, creativity, and collaboration. CBRE’s India office occupier survey of this year emphasizes this by stating occupiers strive to establish a ‘new normal’ for the workplace with the right tools, spaces and experiences that cannot be easily recreated outside the office. Some of the features that office buildings can incorporate are:
- Natural light and ventilation can improve the health and well-being of employees
- Ergonomic furniture and equipment can reduce physical stress and discomfort
- Smart technology and connectivity can enable seamless communication and data sharing
- Recreational and wellness facilities can promote work-life balance and employee engagement
According to CBRE 2023 survey, ~91% of occupiers were positive about their business either expanding or recovering. And so the next on the list for large tenants is the need for scalability. As they add employees rapidly, their demand for office space outgrows their current space. This creates a need for flexible and adaptable office buildings that can accommodate their changing needs. Some of the solutions that office building owners and developers can offer are:
- Modular and movable walls that can create different layouts and configurations
- Co-working and shared spaces that can provide additional capacity and networking opportunities
- Short-term and long-term leases that can allow tenants to adjust their space requirements according to their business cycles
A major concern for tenants is the commute fatigue of their employees. Due to poor physical infrastructure, traffic congestion, and public transportation issues in India, employees may face long and stressful commutes to their workplaces. This can affect their morale, performance, and retention. Therefore, tenants prefer office buildings that are located in strategic and accessible locations that can reduce the commute time and stress of their employees. Some of the factors that office buildings should consider are:
- Proximity to major roads, highways, airports, and railway stations can facilitate easy transportation
- Availability of bike and car parking spaces, electric vehicle charging stations, and shuttle services that can cater to different modes of transportation
- Integration with mixed-use developments that can provide amenities such as retail, dining, entertainment, and residential options within walking distance
As the work culture and job description of tenants change due to the impact of artificial intelligence, automation, and digitalization, they require office buildings that can support their new ways of working. These include flexible hours, remote work, project-based work, cross-functional teams, and innovation labs. According to the Colliers “Real Estate 3.0: Technology-Led Growth” report the rise of PropTech is sweeping the real estate sector as an innovative digital transformation. Technology in the real estate segment that was largely confined to listing residential and commercial properties is now infiltrating every aspect of real estate. To accommodate these changes, office buildings need to provide modern amenities that can enhance the functionality and aesthetics of the workspaces. Some of the amenities that office buildings can offer are:
- High-speed and reliable internet that can enable online collaboration and cloud computing
- Flexible conference rooms and meeting spaces equipped with video conferencing and presentation tools
- Cafeterias and coffee shops can provide food and beverages options as well as socializing spaces
- Lounges and breakout areas that can provide informal and relaxed spaces for brainstorming and ideation
The COVID-19 pandemic has posed unprecedented challenges for tenants as they have to cope with lockdowns, social distancing, health risks, and business continuity. As a result, they have to rethink their office space strategies and adopt new measures to ensure the safety and well-being of their employees. According to CBRE, more than 3/4th of tenants expects offices to have touchless technologies and higher air quality. Some of the measures that office buildings have to implement are:
- Enhanced cleaning and disinfection protocols that can reduce the spread of germs and viruses
- Improved ventilation systems that can increase the air quality and circulation
- Contactless entry systems that can eliminate the need for physical touchpoints such as door handles, elevators buttons, etc.
- Office configurations to support distributed and resilient team structures
Another factor that affects multinational tenant expectations is their commitment to address climate change issues. As more multinational tenants adopt environmental, social, and governance (ESG) policies and practices, they expect office buildings to align with their sustainability goals. In 2022, more than 90% of S&P 500 companies has started reported climate impact information in its SEC filings. CBRE survey reports 83% are considering sustainability benchmarking of their properties. In other words, green and sustainable buildings will be seeing greater demand especially by large tenants. Some of the criteria that office buildings have to meet are:
- Energy efficiency measures can lower the energy consumption and carbon footprint of the building
- EV charging stations in the building
- Renewable energy sources such as solar or wind can generate clean energy for the building
- Water conservation measures such as rainwater harvesting or water recycling can reduce water usage and wastage
- Waste management measures such as composting or recycling bins that can divert waste from landfills
- Green certifications such as LEED or IGBC
The last factor that influences tenant expectations is the safety and security of their employees and assets. Tenants require office buildings that can provide a safe and secure work environment that can protect their employees and assets from lockdowns, strikes, terrorism, etc. Some of the features that office buildings can provide are:
- Surveillance cameras and security guards can monitor and deter any unauthorized or suspicious activities
- Alarm systems and fire sprinklers can alert and respond to any emergencies or hazards
- Backup generators and uninterruptible power supplies can ensure the continuity of power supply in case of blackouts or brownouts
- Emergency exits and evacuation plans can facilitate the safe and orderly evacuation of employees in case of emergencies
Modern office buildings need to meet the diverse, complex and changing needs of their tenants. To do this, they need to have professional and institutionalized property management that can enhance tenant satisfaction, adopt advanced technologies, implement sustainability goals and promote wellness of occupants. Therefore, it is essential for office building owners, managers and developers to strengthen their property management capabilities to attract and retain tenants in their properties.