An increasing number of IT and financial services companies are looking to renegotiate property rentals and shift to smaller offices as the coronavirus pandemic continues and more agree that work from home is here to stay.
Among NBFCs, Housing Development Corporation has asked regional managers to renegotiate rental contracts, sources told Mint.
Among banks, IndusInd is looking to cut down rental bleeds by 25-30 percent has decided to let go of one leased office space in a prominent commercial complex in central Mumbai, another source added. Axis Bank meanwhile will give employees work from home for two to three days a week, guidelines for which are expected soon, as per the report.
Moneycontrol could not independently verify the report.
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The pattern is consistent across companies, especially since consensus is that work from home would likely stay going forward. Besides renegotiating contracts and moving to less expensive properties, many are looking to downsize office space or putting expansion plans on hold, it said.
“We do not see companies giving up their prime real estate footprints, especially for front-end offices, but corporates may look at reorganizing their office space," Kaustuv Roy, managing director-business solutions, Savills India told the paper.
Sector wise, IT and ITeS made up 42 percent of commercial leasing in 2019, followed by co-working companies (15 percent), manufacturing and industrial companies (10 percent), and banking, financial services and insurance companies (BFSI – over 7 percent), as per Anarock Property Consultants. Among cities, Mumbai, Delhi and Bengaluru topped the list.
As per a JLL report ‘India Real Estate Market Update Q12020: Offices’, most companies deferred real estate decisions in March, while net absorption of office spaces fell 30 percent YoY for the quarter.
“Multiple polls across customers found they expect to continue with around 5-15% employees working from home in the long run when the situation normalizes," Sanjay Bajaj, managing director, JLL India said.
For IT companies however renegotiation of contracts may be tough as terms usually last several years. IT and BFSI companies are also usually situated in prime real estate which increases cost.
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