Coronavirus Impact: Travel Restrictions May Delay Decisions On Commercial Real Estate Space Take-up.

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Coronavirus Impact: Travel Restrictions May Delay Decisions On Commercial Real Estate Space Take-up

Current advisories restricting travel following concerns over the coronavirus pandemic may lead to delays in decisions on commercial real estate space take-up in the short term but the long-term impact remains unknown as the longevity of the crisis is uncertain, said real estate experts.

While there may not be a major impact on office demand due to coronavirus, decisions over commercial space take-up may be delayed. Occupancy in flexible workspaces may also stay muted, they said.

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"The impact of travel restriction in India is likely to be short-lived providing that the virus remains relatively contained. The recent rise in COVID-19 cases could impact retail consumption as people avoid crowded areas, especially F&B, entertainment centres, shopping malls, amongst others. Office leasing demand as of now has been unaffected due to a sustained appetite amongst US and EU based corporates for India as an outsourcing destination. However, the global impact could potentially result in delayed decision-making, curtailed capital expenditures, thereby slowing down portfolio decisions in the short term," said Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE.

Also Read | Coronavirus: Over 20 lakh employees to work from home, but is India Inc ready?

On the positive side, health and wellness of employees could take centre stage for majority of the corporates; with greater focus on workplace hygiene, remote working policies and increased adoption of flexible space options, he added.

"Due to the current advisories restricting travels, there may be delays in decision process. Therefore, the short- term impact on the real estate sector remains contained. The long-term impact remains unknown as the longevity of the crisis is uncertain," said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

"Currently the realty market remains unaffected with minor impact on the investor decision timelines," said Samir Jasuja, founder & CEO – PropEquity.

While there may not be a major impact on office demand due to coronavirus, decisions over commercial space take-up may be delayed. Occupancy in flexible workspaces may also stay muted, according to a new report.

In 2020, as much as 54.3 million sq feet of gross absorption of commercial office space take is expected.

"Some delayed decision making by occupiers who depend on clearances from overseas, especially Asia are expected," said a report by Colliers titled 'COVID-19: Impact on India Real Estate'.

In 2019, institutional investments from Singapore, Hong Kong and mainland China together accounted for 28 percent of total real estate investment in India. At a time when funds from Asia are increasingly looking towards India's Grade A office assets, investors are expected to remain bullish over the next five years.

However, slower decision‐making in H1 2020 is foreseen which could constrain capital deployment in India, the report said.

"Precision instruments, machinery, automotive and communication equipment are the sectors most likely to be affected. This will likely have a moderate effect on office leasing demand in Q1. If the outbreak is contained in H2 2020, we expect see some recovery over Q3 2020," the report added.

Indian realtors, however, are of the view that the virus may not have a major impact on the domestic real-estate market. The impact may be restricted to high-end luxury real estate that relies heavily on import of fixtures and furniture from China.

“Imports from China have slowed down as a result of the unprecedented situation arising from the coronavirus pandemic. When we look at possession dates as also the ongoing interior work in the luxury real estate segment, these are definitely going to be delayed. Supply of fixtures, furniture and fittings used in luxury housing in India is also imported from China and will be impacted,” said Niranjan Hiranandani, president (National) NAREDCO as also President, ASSOCHAM.

Also, there were no alternative sourcing options for the fixtures, furniture and fittings at the price contracted with Chinese manufacturers, he added.

“The impact of the virus is difficult to estimate. It’s not clear how it will play out in the long run but something we will have to keep a watch on the overall macro level,” Mohit Malhotra, managing director and CEO at Godrej Properties Limited, said.

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