Companies unwilling to surrender office leases as they expect to reopen soon

Corporates and companies are unwilling to let go off their leased office spaces despite work from home becoming the norm.

A report by ‘India Ratings and Research’ revealed that very few companies have surrendered their commercial property leases, fearing a higher upfront fit-out cost if the offices open sooner than expected. However, there have been cases of office lessees cancelling their leases.

Experts expect the commercial real estate sector to bounce back and report a substantial hike in rent collection in the coming fiscal (2021-22), when compared to the weak performance last year, but still lower than rental incomes for 2019-20.

The report suggests that an accelerated vaccination programme will result in restarting offline work in the days to come. But most offices have given flexible working options to their employees since the lockdown last year, which may still be an obstacle for companies re-occupying their leased spaces.

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About 40 per cent of office lessees in the country are IT and IT-enabled services sector companies. A majority of these firms have adopted flexible/hybrid working options, encouraging people to work from home.

Despite a brief lull, the residential real estate sector is expected to make a sharp K-shaped recovery in the coming financial year. The overall floor space sold is likely to increase by 30 per cent year-on-year in FY22 after a 34 per cent year-on-year decline in FY21.

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The report divided residential real estate developers into three categories:

· Grade I  – whose sales are likely to grow by 49 per cent.

· Non-Grade I – who are expected to see their sales rise by 26 per cent

· Non-Grade I – developers struggling to find their footing because they are unsure about their ability to timely deliver projects and limitations in accessing finance.