Commercial real estate, most notably the retail and office spaces, have been hit hard by the COVID-19-induced new normal across the world. It is, hence, being debated whether commercial real estate would be able to reinvent itself, to remain relevant in the post-COVID world, where the work from home (WFH) culture and online shopping threaten to eat up the market share of retail and office space segments, which were highly lucrative till recently.

mpact of COVID-19 on commercial real estate market

As per a Track2Realty consumer survey, 56% employers are finding WFH to be a long-term reality. In retail spaces, the vast majority of Indians (as many as 84%) are comfortable with the reality of online shopping. Does this mean bad news for commercial real estate? Not quite, as the study also noted that the WFH culture was affecting the mental health of the workforce. No less than 68% of Indians were craving to return to the office set-up for better productivity and work-life balance. Similarly, malls that were more than the shopping centres, were being missed by a large share of the respondents. As many as 84% said that they would love to go back to the malls for leisure and entertainment.

This calls for a reality check. How can commercial real estate developers and operators pull back the eager-but-hesitant Indians? If WFH continues to be a reality and Indians are comfortable shopping online, why should office spaces and malls even exist? If the commercial spaces exist, there is a running cost to it. Most of the developers in this segment have the dual challenge of serving the debt interest as well as the occupiers’ increasing exit. Can there be an innovation that the market adopts seamlessly? Industry stakeholders, too, are thinking on the same lines but have no concrete plan of action as of now.

The future of office space after COVID

Vipul Shah, MD, Parinee Group, believes that after more than a year of adapting to WFH, organisations may be required to take into consideration full-office makeovers, to get employees back to their desks. New-age commercial spaces need to focus on collaboration and must elevate the principles of dynamic, purposeful and people-first workspaces that are focussed on a collaborative work culture, he says. “Adapting to futuristic and more agile ways of functioning, accompanied by technological innovation, have become a prerequisite for accomplishing a more transparent and rewarding work culture. In such a scenario, going phygital (i.e., a combination of physical and digital offerings) will help fix the gap caused due to physical and remote workspaces. These technically advanced two-way set-ups, through their adaptable nature and capability to reconstruct community among detached employees, will be the key for sustained growth,” believes Shah.

Aditya Kushwaha, CEO and director at Axis Ecorp, points out that historically, external shocks such as an epidemic and even economic downturns, did not have a long-term impact on commercial real estate. It was mostly immediate and never as widespread. Things are different in this post-COVID-19 period, as there is still a great deal of uncertainty. The WFH trend has resulted in weakened demand for large office spaces and even the rental market has taken a hit. “Companies have put plans for space expansion on hold. Even with rent/lease agreements, corporates desire far greater flexibility in terms and prefer spaces that require minimal capital investment. Malls are also looking at cutting down the time people spend inside. Before the pandemic struck, the objective of shopping malls was to make sure that consumers spend maximum time inside the store. The new approach will be to make sure that people are able to find what they need easily. There will also be steps introduced to cut down on the touchpoints for the consumers. It is also a possibility that outdoor retail spaces, such as walk-in malls, may see an uptick in the future,” says Kushwaha.