India Office RE: Investing and Leasing Trends during COVID
In a nutshell
At the start of lock-downs there was an expectation that COVID induced WFH concept may permanently damage office demand. While the debate is yet to settle, investment interest over the last few months remained high, leading to ~US$5Bn+ of closed / ongoing transactions
The COVID-19 pandemic induced lockdowns brought about a change in the way businesses operate. As corporates adopted Work-from-Home (WFH), working through digital tools and online meetings became the norm. An early expectation was that the flexibility and cost arbitrage offered by WFH would lead to increase in office vacancies. However, as the year panned out and the first lockdown was lifted, it has been observed that Investment and leasing trends for commercial, across multiple parameters, continued to remain robust.
Institutional investors continued to acquire core commercial assets, similar to pre-covid days as some of the largest deals were finalized. Likewise, public investors too exhibited strong interest in the asset class as the IPOs of Mindspace REIT and Brookfield REIT received excellent subscription. The listed REITs in turn continue to post healthy results with new leasing / renewals happening at escalated rentals within their portfolios. On the leasing front, some of the largest global corporations added further office spaces to their existing presence across the major cities in South India. Mumbai benefitted from a mix of both front office and IT-ITeS demand.
As the world continues to be affected from recurring waves of the pandemic, the jury on the asset class is still out. Yet, basis the interim trends, one can conclude that WFH is unlikely to replace the requirement of offices and that commercial asset class in India may actually grow as more global corporations set up their offshoring units in order to become cost-competitive.