The latest second COVID-19 wave coupled with extended WFH (for many firms until October) may further prolong office leasing recovery in India. In fact, leasing volumes had plunged by 30-35% by Q1 2021. However, the prospects of commercial office leasing for 2022 is positive, going by the recent-past hiring trends of large IT/ITeS firms which will spur office space demand.
Description automatically generated with medium confidencePrashant Thakur, Director & Head – Research, ANAROCK Property Consultants says, “The top four Indian IT/ITeS firms – TCS, Infosys, HCL and Wipro – alone hired approx. 42,000 employees in the first nine months of FY 2021. Also, multinational majors Cognizant and Capgemini hired nearly 39,500 employees in CY 2020, with bulk hiring plans for CY 2021. They plan to hire about 23,000 and 30,000 employees respectively in CY 2021. Many other IT firms are on a hiring spree amid acceleration in their overall business post the pandemic.”
This bodes well for overall office space demand in 2022 and 2023, with the gradual return of normalcy coupled with the newly added workforce. The IT/ITeS sectors are among the prime drivers of overall leasing activity in the top cities. Bulk hiring by these firms will influence the demand for large quality office spaces.
Despite increased flexibility and rostered work timings, firms will need to adopt de-densification measures to accommodate the new social distancing norms and increased health measures. This is expected to increase per-employee space requirements from 80 sq. ft. space during pre-pandemic times to at least 120-130 sq. ft. per employee post COVID-19.
Many IT majors are now focusing on getting at least a certain segment of employees back into offices. This is indicative of the inherent shortfalls of the work-from-home options – data security concerns, employee burnout due to work stretching beyond normal working hours at home, diluted focus and motivation, and compromised team collaboration.
Facebook, Microsoft and Uber have strongly indicated that they expect such a return migration to begin by May 2021. While Google and Microsoft will prefer hybrid work models going forward, these firms also take health norms very seriously. Given the fact that COVID-19 will not be eradicated for a long time (if ever), social distancing will become a more or less permanent feature in future workplaces.
That said, despite the vaccination drive across other countries, the rising cases in the second or potentially third wave is a cause of concern. Many European countries have again gone into complete lockdown; this may adversely impact commercial leasing in India over the short-term. International business travel has also not resumed.
Overall leasing in India will therefore remain lacklustre in 2021. The anticipation of a partial lockdown in some of the bigger cities will also cause commercial leasing to walk a tightrope this year.
Nevertheless, the energetic bulk hiring activity by major IT/ITeS companies to fulfil surging work orders during the pandemic presents a potentially more upbeat picture for office leasing in 2022 and beyond. These firms have a healthy pipeline for the current year, as well:
TCS hired around 21,000 employees in the first 9 months of FY 2021: the third quarter recording the highest ever
Infosys hired nearly 7,000 employees in the same period too.
Wipro hired almost 7,500 employees in the same period.
HCL hired approx. 6,500 employees in first three quarters of FY21.
Cognizant hired >17,000 employees in CY2020 and plans to hire >23,000 employees in CY2021
Capgemini plans to hire ~30,000 employees in 2021; 25% increase from last year