Demand for satellite and boutique offices rise post Covid

@the_news_21

With the third wave of the pandemic ebbing, the growth prospects of the commercial real estate segment are all set to recover. During the most appalling period of the pandemic, Work From Home (WFH) had marred the potential of commercial real estate as companies let go off leased spaces to reduce their rental expense. Commercial spaces as an asset class witnessed tremendous uncertainty in the beginning of Covid-19 but now it’s gradually diminishing as corporates are inviting their employees back to office as the situation is improving. The pandemic has strengthened the importance for hybrid office culture due to which demand for satellite and boutique offices have seen a considerable rise.

Commenting from the demand perspective Mr. Bhasker Jain, Head – Sales, Marketing & CRM at The Wadhwa Group said, “We are witnessing a mindset where institutions and individuals are looking to opt for flexible working spaces that are easy to own and operate. Long term leasing in large formats is currently being evaluated by the conglomerates or institutions that have a very large set up and employee base. Rest for other companies, individuals, SMEs etc are opting for the hybrid model where people can switch between the work near home concept and physical presence depending on their requirements. We are also seeing a good demand for boutique offices in residential zones. A lot of traction is observed from startups, SME’S, emerging professionals like Lawyers, CA’s, Entrepreneurs, etc who are opting for such flexible, customizable format commercial spaces where depending on the requirement they can scale up over time. Moreover these spaces can be bought at an early stage of construction which gives them comfort of easy payment schedule through installments. Besides, such boutique and flexible spaces give individuals a chance to own and for institutions to have their own independent setup with minimal investments, which in future if not occupied can be leased out easily with good rental yields.”

COVID has induced a lot of changes in commercial real estate in Mumbai. Instead of having expensive, large head offices in the CBD’s, companies are choosing to have cheaper, satellite offices closer to the residential areas. This is not just saving significant costs for the company, but also allows for a flexible growth model. Demand for smaller spaces at traditionally residential locations are likely to increase.

Ms. Shraddha Kedia-Agarwal, Director, Transcon Developers said, “Post-Covid, commercial real estate has seen a revival due to the demand for satellite and boutique offices. Also, companies are now looking at a hybrid work environment which has led to a revival in commercial real estate increasing the confidence of the investors. These offices are developed near the residential areas which save the commute time and are easily accessible due to the improved connectivity. These spaces also provide long-term stability through a steady ROI and scope of future growth.”

According to JLL, the Indian office sector saw net absorption of 11.56 million sq. ft in October-December 2021, the highest in the last eight quarters, and up by 86 per cent quarter-on-quarter. Net absorption was up 26 per cent year-on-year for the half-yearly period of July-December 2021.

Commenting from the investment point of view Mr. Khetsi Barot, Director, The Guardians Real Estate Advisory said, “In the Indian context, a hybrid office is something that you get in- between an office and a home which reduces your commuting time. Many of our corporate clients are downsizing their big head offices at the expensive business centres and bringing more satellite offices where their employees are staying. They are moving away from a one-desk-per-person concept to a shared desk model. As a result, we have seen a tremendous demand for small and boutique office spaces, especially in close vicinity of large residential areas like Malad, Goregaon, Kandivali, Thane, Andheri, Khar, Bandra, etc. This has also opened a new investment opportunity for people who have generally shied away from investing in commercial real estate due to the high price tag attached to it.”

“The demand for small boutique offices from both corporates and small firms has revived investment sentiments. This has created a niche investor who has realized that there is guaranteed high rental return along with a huge appreciation potential for offices especially that are smaller in size measuring 500 to 1,200 sq ft.” Mr. Barot further added.