Covid 19.. WFH 20... CRE 21

In a post Covid scenario, the WFH culture will retain its usefulness and criticality. This will mean that in the coming years, Corporate Real Estate (CRE) will undergo a significant change in more than one respect. I believe that the three most critical dimensions on which we would perceive the maximum impact are as follows:

Shrinkage of commercial footprints

Business as usual is changing due to the black swan event experienced across the globe, and companies willingly or otherwise, will be forced to reconsider their CRE requirements. Right now, remote working has become a temporary necessity in most parts of the world, pushing companies to reassess their well-oiled systems and look for flexible alternatives. If most of us can effectively have our employees work from home, do we really need a lot of office space? Hot desking has been gaining momentum for a while now, wherein companies have chosen to give employees just a locker to keep their personal belongings rather than dedicated desks and spaces to personalize. Such a churning of events is likely to give rise to a new paradigm in commercial real estate with business no longer requiring large footprints. If such patterns gain momentum, CRE departments will be forced to restack, rechurn, and reassess their actual need for commercial space.

 

Should you have all your eggs in one basket?

Centralized, large scale offices, with over 1000 employees under one roof, provide companies with economies of scale. However, taking the current scenario into consideration, companies might now be better off dispersing. Should another disaster like Covid-19 occur, companies that have all operational activities under one unit stand to suffer the most. Instead, if companies choose to split themselves up into smaller offices across the city and perhaps the country, they mitigate the risk of having to completely cease activity in times of adversity. Although the initial cost of setting up multiple offices, administrative and security overheads will be higher, such a step will prove to be a better and more effective method of disaster management in the future. 

With co-working spaces gaining popularity, employees and employers alike might prefer a flexible office that is easy to check into even when on the move. Employees can maximize their productivity and considerably cut down the time they would otherwise spend on traveling. New technology will allow teams across the globe to interact in real time easily, eliminating the need for physical contact. As a business owner, your decision to diversify and disperse will give you all the flexibility needed to combat disasters, and strengthen Business Continuity Planning (BCP).

Cookie cutter offices

With flexibility and BCP becoming critical, occupiers will be urged to reassess their standard lease terms and Tenant Improvement (TI) budgets. The craze for customised offices will wane and give way to standardized, well designed office spaces that allow companies to move in and out on shorter notices. Lease tenures will reduce, while the demand for fully fitted out office spaces will soar. Developers may need to reconsider their design strategy to include smaller, fitted out spaces rather than large cold shell floor plates for commercial buildings.  

The economic impact of such emerging trends will be considerable to say the least. Commercial terms are likely to change and evolve, forcing developers, architects, landlords, investors, REITs, et al to rethink their conventional approach to CRE.

“Views expressed are the personal views of the author. Any action taken based on the views will be the responsibility of the user alone.”

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