Deloitte to shut four UK offices, to retain all staff on work-from-home contracts – ET RealEstate

BENGALURU: Global accounting and consulting firm Deloitte will close four of its 50 British offices as it reviews its real estate portfolio in the coronavirus pandemic, but will retain the staff on work-from-home contracts, it said on Saturday.

COVID-19 has changed working life for millions of people around the world, many of whom have switched from offices to working from home – reducing demand for office space and prompting companies to opt out of renewing leases.

Deloitte said it would shut its offices in Gatwick, Liverpool, Nottingham and Southampton, where about 500 people work.

“COVID-19 has fast-tracked our future of work programme, leading us to review our real estate portfolio,” Stephen Griggs, Deloitte’s UK managing partner, said in an emailed statement.

He said all staff based at the four locations slated for closure would continue to be employed by Deloitte under permanent work-from-home contracts.

“Any proposed change is to our ‘bricks and mortar‘, not our presence in these regions”, he said.

The Financial Times newspaper first reported on the closures.

In April, Deloitte said it would be cutting pay for partners at its British businesses by 20% to protect jobs during the coronavirus crisis.



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India office property market shows resilience, Q3 absorption up 64% on-quarter – ET RealEstate

MUMBAI: Indian office property market has shown resilience as indicated by the rising net office take up despite the impact of Covid-19 on the business environment and the emerging challenge of the Work-from-Home model.

Office property markets across the country have witnessed a net absorption of 5.4 million sq ft in the quarter ending September, a 64% rise against the June quarter that was impacted significantly due to the lockdown, showed data from JLL India.

The jump in office absorption is an encouraging trend especially after it dipped almost at a similar rate in the second quarter.

“While we continue to see the impact of the pandemic on various businesses, there is a significant surge in activity across most office markets under consideration. This is seen in gross leasing which more than doubled from the previous quarter at 13.8 million sq ft,” said Ramesh Nair, CEO and Country Head, India, JLL.

At the same time, Nair also highlighted that large and mid-sized occupiers across major markets continue to review their real estate portfolios in a bid to optimize cost and higher emphasis is being given to sustainability and employee well-being as well as adoption of flexible working practices.

While the share of occupiers from information technology (IT) and IT-enabled services segment in gross leasing dipped to 43% in the quarter from 61% in previous quarter, e-commerce and manufacturing sectors gained significant share and supported the market.

Owing to surging demand of e-commerce during the pandemic, occupiers from this sector formed 16% of leasing in July-September as against almost negligible proportion the previous quarter, while share of manufacturing occupiers also rose to 17% from 5% previous quarter.

The third quarter office rebound growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80% of the net absorption. The heightened activity in Bengaluru indicates a gradual resurgence in take up of spaces coupled with the translation of pent up demand from the previous quarter.

New completions during the period increased 59% on-quarter with 9.2 million sq ft of new stock coming to market indicating confidence.

“With lockdown restrictions being relaxed in the third quarter in most of the markets under review, office projects in the final stages of construction or pending receipt of occupancy certificates came onboard. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq ft witnessed in Q1 2020,” said Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

In sync with net absorption, Bengaluru and Hyderabad led the increase in new completions accounting for 87% of the total new completions during the period. Interestingly, new completions in both these markets even went past the average new completion levels witnessed in the four quarters of 2019.

Increased office space consolidation and optimization strategies of corporate occupiers resulted in subdued net absorption levels, which could not keep pace with new completions. This resulted in overall vacancy increasing marginally to 13.5% from 13.1% in the previous quarter.

Despite the rise in vacancy levels in southern markets, Bengaluru, Chennai and Pune continued to hover in single digits, which augurs well for a robust rebound in these markets when economic and business conditions improve in the coming quarters.

Rentals across key cities remained stable except for Bengaluru that witnessed a marginal increase in rents. Stable rental values and low vacancy levels, the office market in India continues to be landlord favorable. However, owners have also become more flexible in providing increased rent free periods, reduced rental escalation and fully furnished deals to prominent occupiers lowering their net outgo.



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Can WFH concerns over comfort revive commercial real estate? – ET RealEstate

Real estate developers and select equity analysts believe that the initial euphoria about improved productivity from work from home (WFH) has ebbed and has now triggered concerns over employee burnout, organizational culture and team bonding.

A survey conducted by Knight Frank also showed that 90 per cent of employees in the country miss their office environment while working from home. This makes a case to look for commercial real estate players which may benefit from the recovery of office leasing market in India.

Edelweiss Securities believes that WFH will supplement offices but will not be a substitute in the long run. The brokerage is bullish on realty players with robust office portfolios including DLF and Brigade Enterprises.

Shares of DLF and Brigade Enterprises have rallied 12 per cent and 20 per cent, respectively, since April 1, while BSE Real Estate index has gained 25 per cent during the same period.

According to industry watchers, Covid-19 pandemic has impacted the overall business sentiment but demand for office space will revive as India slowly comes out of lockdown mode.

“There will be a demand bounce back. Currently, things are moving slowly but maybe next year, we will see the momentum picking up,” Vinod Rohira, CEO, Mindspace Business Parks REIT, said during a virtual real estate summit organised by CII.

Market mavens have observed that employees appreciate the enhanced flexibility and savings in commute time due to WFH. However, they are facing a host of other issues which includes lack of human interaction. The blurring of personal and professional lives has also led to a feeling of burnout as work-life balance has gone awry. Even Infosys co-founder N R Narayana Murthy on Monday said he is not a ‘great fan’ of WFH.

A report by the National Bureau of Economic Research in the US also found that WFH days are 48 minutes longer with more meetings to attend and emails to answer.

Some of the concerns which are highlighted in a survey conducted by Knight Frank with employees of tech companies in India include the problem for working parents who have to balance their work commitments with childcare and homeschooling.

On the other hand, singles are facing issues of loneliness which is leading to mental health risks. A sedentary lifestyle is also taking a toll on physical health and well-being of employees.

Lack of space at home due to sharing of the place with family or roommates, infrastructure issues like low bandwidth, power outages and worries over data privacy are among other major concerns of employees and corporates.

Anuj Puri, Chairman, ANAROCK Property Consultants, said, “We are gradually seeing demand for commercial spaces pick up in key cities. The shortcomings of the WFH culture have also been exposed, and a lot of employees are now coming back to their offices. Mumbai and Delhi-NCR are seeing more employee footfalls than Bengaluru, Hyderabad and Pune.”

He further added that many companies will continue WFH model only for a certain percentage of their workforce, and will have to de-densify their office spaces for the employees who cannot WFH. This is because companies must now adhere to the new social distancing norms. From 80 sq ft space per employee, it is being increased to 120-130 sq ft per employee.

Some reports also suggested that leasing demand in the global market has already picked up including from tech giants like FAANG, which were at the forefront of WFH. In the latest commercial property update in India, Google is set to pick up over 2 million square feet of commercial space in Hyderabad.

Edelweiss Securities highlighted that leasing activity in China has picked up in April-June after a sharp decline during January-March due to the pandemic. This indicates that concerns over WFH leading to a collapse in office demand could be unfounded.

On the other hand, residential-focussed real estate companies have outperformed commercial players since the beginning of the ongoing financial year. Shares of Sobha, Godrej Properties, Oberoi Realty, Prestige Estate and Sunteck Realty have gained between 27 and 60 per cent during the past six months.

Commenting on the sector, Nilesh Shah, MD and CEO, Envision Capital, told ET NOW that commercial real estate sector is probably the last place to be in now. “Work from home is now becoming an accepted kind of practice. Commercial real estate is going to face significant headwinds going forward,” he added.



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Little scope for IT companies’ realty cost saving led by work-from-home: Report – ET RealEstate

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MUMBAI: Saving real estate cost is unlikely to be a key variable to support the work-from-home model as Indian information technology industry’s annual real estate expenditure is just around 4.3% of its operating income, showed a Knight Frank India study.

According to an analysis of total 119 IT companies’ financial statements, smaller IT companies spend their 4.7% on real estate, followed by large IT companies at 4.4% and mid-sized IT companies at 3.6%. Overall, office space rent paid by IT companies constitutes 0.5% to 2% and the remaining is the cost incurred towards operating these facilities.

With consideration for an assumed 50% of employees working from home, net cost savings yielded for IT firms stood at around 1%. This is after adjusting for additional cost borne by IT companies for setting up the home infrastructure. In case of large IT companies with owned premises, this cost-saving will be even lesser compared to companies operating from leased properties, the report said.

“Going forward, we feel that the choice of work from home versus work from office will be decided by many other factors and not cost savings alone. While the savings on real estate operations expenses are marginal, this saving has to be measured against qualitative aspects of the business such as lack of control, retention and attraction of talent, competitive edge, data security etc,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Based on Knight Frank India’s survey with 1,600 employees of Information Technology (IT) & Information Technology enabled Services (ITeS) companies, nearly 90% of survey respondents miss their office environment while working from home.

In the share of employees who miss their workplace, NCR with 98% led the table followed by Mumbai with 94%, Bangalore 91%, Chennai 90%, Pune 88% and Hyderabad with 81% respondents missing the work environment.

The survey cited that 60% of respondents believed time saved due to no office travel, and 58% highlighted savings due to no cost of travel, as advantages for WFH. Whereas, in terms of disadvantages, 43% felt a lack of office driven social life and 42% cited difficulty to focus in an informal setting.

The Information Technology sector has been the key driver of India’s office market. It contributed 44% of cumulative office space demand in the last 10 years until 2019.



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