Return to office: Evolving corporate landscape redefines working space

As companies asked employees to return, demand for office spaces surged this year

* “In WFH (work from home), you get more personal space. Travel time can be spent on productive things.” 

– Kolkata-based IT employee

* “We strongly believe that they (employees) need to come to office so that the new workforce gets integrated with the larger workforce of TCS. That is the only way they will learn, understand and internalise TCS values and the TCS way.” 

– Milind Lakkad, executive vice president and chief human resources officer, Tata Consultancy Services (TCS)

Return to office. This message echoed loud and clear through corporate corridors this year. The resistance, too, was loud and intense. Employees returned, often grudgingly. 

As they tried to wean them away from their homes, some organisations adopted a nuanced approach — a hybrid work style, allowing for a few days of WFH in a week. It worked, and it didn’t. After “Great Resignation”, “Quiet Quitting” and “Career Cushioning”, a new expression emerged in the office lexicon — “Coffee Badging”, wherein employees appeared in the office, but only briefly, clocking in, grabbing a coffee, chit-chatting and then going back home to work remotely. A global survey (‘State of Hybrid Work 2023’) by video conferencing device-maker Owl Labs found that more than 39 per cent of hybrid workers had adopted this ritual.

The reverberations of the return to office were, meanwhile, felt across the office space landscape, which painted an unexpectedly robust picture.

In the first nine months of 2023, the office leasing sector showed steady strides. Commercial real estate consultancy CBRE reported an uptick, with 41.8 million square feet of office space leased across the top nine cities – Delhi-National Capital Region, Mumbai, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, Ahmedabad and Kochi. This was 33 per cent more than the previous year, touching 15.8 million sq ft from July to September 2023 alone.

Supply-wise too, it was a busy year, with 41.7 million sq ft added to the market between January and September 2023, CBRE reported. Bengaluru, Hyderabad and Pune took the lead, accounting for 71 per cent share, solidifying their status as key growth hubs.

Sectors like banking, financial services and insurance (BFSI) took the lion's share at 29 per cent, closely followed by tech companies (23 per cent). Other players, such as lifesciences firms (10 per cent), flexible space operators (8 per cent), and research, consulting and analytics companies (7 per cent), also contributed significantly. American and domestic firms led the absorption equally in the July-September 2023 period with a share of 42 per cent each.

Real estate consultant Knight Frank reported an 8 per cent surge in office transaction volumes for the January-September 2023 period compared to the same timeframe the previous year. And Anarock recorded nearly 35 million sq ft of new completions and around 25 million sq ft of net absorption in the first nine months of 2023 (January to September). In all of 2022, around 45 million sq ft of Grade A new office supply had been added across the top seven Indian cities, and the net absorption was nearly 36 million sq ft, according to the real estate consultancy. 

While private equity (PE) investments in Indian real estate stood at $2.3 billion in H1 FY24, which was 12 per cent lower than in H1 FY23, for the commercial office sector, these increased – accounting for 78 per cent of the investments in 1H FY24 compared to 56 per cent in 1H FY23. Anarock attributed this uptick to the investors' sustained preference for Grade A office assets housing high-quality tenants. 

By the hour

Corporate India meant business. And corporate giants had some suggestions, one of which, by Infosys founder NR Narayana Murthy, kicked up a storm: "... my request is that our youngsters must say, 'This is my country. I'd like to work 70 hours a week'," Murthy said.

Among employees, it triggered a nationwide debate over work-life balance, and mental and physical well-being, with many terming it “absurd”. Several CEOs and company founders, meanwhile, backed Murthy’s suggestion.

An International Labour Organisation data for 2023, meanwhile, revealed that Indians already have the longest average work week at 47.7 hours per employed person. And according to a 2023 McKinsey Health Institute survey, conducted across 30 countries, 62 per cent of Indian employees reported workplace burnout.

Murthy’s statement came at a time when firms are insisting on work from office (WFO). “If employees are not compliant with the WFO rules, leaves are automatically deducted,” complained an IT employee. 

In May this year, 55 per cent of Wipro employees were mandated to work from office. And from mid-November, the company asked all its employees to get back in office. “We strongly believe that in-person interactions are critical to the professional development of our talent as well as to our success in driving ongoing innovation for clients. We look forward to welcoming all our employees to the office,” a Wipro spokesperson said. 

At Bengaluru-headquartered Happiest Minds, majority of the employees now work from office, though not on all days of the week. “Over 90 per cent of our team members are working from their designated offices in a hybrid model, and we expect to reach 100 per cent WFO in the coming few months,” said Sachin Khurana, senior vice president and chief people officer. 

Watch this space

Mumbai-based Mindspace Business Park REIT, which is backed by the K Raheja Group, said that unlike the US, which has a 40 per cent return-to-office rate, India is witnessing a 74 per cent return rate. This phenomenon is pushing the realtor’s commercial portfolio up. 

“In 2023, the demand for Grade A commercial office spaces is expected to reach nearly 40 million sq ft, up from 34 million sq ft in 2022 and close to the 2019 figures of 44 million sq ft,” said Ramesh Nair, CEO, Mindspace REIT.

Bengaluru-based Sattva Group is also focusing on the demand for Grade A offices by large corporations to accommodate the additional employees returning to office. “Occupancy usually spans between 500 and 2,000 seats on average, occasionally reaching numbers exceeding 6,000 seats, contingent upon the nature of business and the growth trajectory of individual companies,” said Mahesh Khaitan, director, Sattva Group.

Co-working spaces, too, are benefiting from this trend.

Awfis, a co-working space provider, said the first three quarters of 2023 saw a gross absorption of 38 million sq ft across six major cities – nearly the same as in 2022, indicating robust momentum despite global volatility.

Demand is exceeding supply in the flexible office space with companies – from startups to Fortune 500 corporations – expanding. Awfis’s “Workspace Next” report found that 63 per cent of the occupiers are adopting a flexible office approach after the pandemic compelled them to reassess their real estate footprint and develop resilient, forward-thinking strategies.

Amit Ramani, founder and CEO of Awfis, pointed out that there has been a significant rise in the number of seats leased for shared office spaces.

“I anticipate the co-working industry to account for 30 per cent of total (office space) absorption in the next five years,” said Aditya Verma, founder and CEO, The Office Pass, a Gurugram-based managed office provider.

According to a report by commercial real estate firm Vestian, co-working firms are expected to lease 10.5 million sq ft this year, up 25 per cent from 2022. Companies, added Amal Mishra, co-founder of co-working firm Urban Vault, are looking for Grade-A office spaces, whether through traditional leasing formats where they deal directly with property owners or by engaging managed workspace providers.

The bottom line is that work from office is what it’s going to be.

Making space

 

* 41.8 mn sq ft office space leased across nine leading cities in the first nine months of 2023 

 

* This was 33% more than the previous year

 

* BFSI took lion’s share: 29%

 

* Tech firms followed: 23%

 

* Equal absorption by US, Indian firms in July-Sept 2023: 42% each

 

Source: CBRE