Covid epidemic may contract demand for office space

Rents Set To Take Nosedive

Yogesh.Kabirdoss@timesgroup.com

Chennai:20.04.2020

Rents of office spaces look set to nosedive as the global slowdown sparked by Covid-19 has triggered a relook among IT companies at their requirements in view of the work-from-home experience. The government has told IT and ITES firms to resume operations from Monday with 50 per cent of staff strength to maintain social distancing.

This could hit the office space sector in the Chennai metropolitan area, which witnessed a robust growth in the last couple of years.

According to ANAROCK Property Consultants, completion of office space complexes and net absorption is set to see a decline in 2020 vis-à-vis 2019. "If this period of working from home turns out to be productive for these companies, they may rethink their office leasing activity in the future," Sanjay Chugh, City Head – Chennai, ANAROCK Property Consultants, said in an emailed response. Firms are already negotiating with developers or landlords for reduction and even waiver of rents for the lockdown period, he added.

As per industry norms, an IT and a BPO employee requires 100 square feet and 30 square feet of space, respectively. With social distancing becoming the norm, new trends will emerge with regard to work schedules. Mohan Kartha, a city-based TNRERA registered real estate agent, said larger companies will prefer less space to house essential staff and ask the rest of the staff to work from home. “The percentage of revision will be known only after the lockdown period,” he added.

A record 6.2 million square feet of office space was leased out in Chennai in 2019 and another 4.5 million square feet is scheduled to be ready this year --- three new IT Parks are under construction at Porur and two were to be operational by 2020. This apart, two major projects are being executed on the IT corridor of Old Mahabalipuram Road. R Murugesan, a city-based developer, said that the Covid-19 crisis will affect office space deliveries scheduled for the next two years. "Occupants may seek revision in rents," he added.

Office space developers, however, question the need to cut rents. Former president of Tamil Nadu chapter of CREDAI Ajit Kumar Chordia said developers are of the view that reducing rents does not arise because IT parks will resume full-fledged operations this week. Moreover, the rupee has appreciated against the US dollar by eight per cent in the recent past, which means more money for domestic IT companies, he added.

An IT and a BPO employee requires 100sqft and 30sqft of space. With social distancing becoming the norm, new trends are expected to emerge