Post-pandemic Flex Leasing At All-time High
The combined office net absorption** across seven cities stood at 11.55 million sq. ft. at the end of the first quarter (January-March) of 2022. According to an analysis published in JLL’s Office Market Update-Q1, 2022, office net absorption was up by a significant 113% year-on-year, clearly indicating the momentum that is now visible in the market. Net absorption was similar to the last quarter due to lingering uncertainties surrounding the Covid-19 pandemic. Net absorption was higher than overall market traction, driven by previous pre-commitments in new completions which became operational this quarter. This is indicative that occupier confidence for older space deals remains intact even as on-ground activity picks up momentum. Some transaction slippages also caused the gross leasing number to be lower than net absorption for the quarter. The technology sector continues to be the highest occupier segment in terms of market activity. The flex segment leased 2.2 million sq. ft of space in Q1 2022, the highest since the pandemic broke. This is also more than 50% of the total annual space leased by this segment in each of 2020 and 2021. As a result, the share of the flex segment in total quarterly leasing stood at 21%. The tech segment continued to lead but its share stood at 25%, while the manufacturing/industrial segment, with its share at 17% in the quarterly leasing activity, continues to gain momentum on the back of proactive policy measures. Consulting also saw its leasing share jump to double digits at 13% with BFSI accounting for a 10% share. “The Gross leasing Volume (GLV) for Q1 2022 was recorded at 10.5 million sq ft, the second-highest in the past 8 quarters. While the Y-o-Y comparison yielded a 40% increase in GLV, the Q-o-Q comparison was lower by 29%. This can be attributed to the fact that most global corporates are awaiting budgetary approvals in the first quarter, which resulted in some transactions missing their closure timelines during the quarter. “The pre-leasing commitments remain intact and there has been very limited or almost no downsizing by larger corporates during the quarter, indicating the shift in occupier sentiment and greater certainty of business as the pandemic remains under control. Additionally, occupiers also leased over 24,200 seats in the flex segment which has gone mainstream given the change in occupier portfolio strategies centered around flexibility and on-demand spaces,” said Rahul Arora, Head of Office Leasing Advisory, India, JLL The larger cities of Delhi (27%), Mumbai (18%), Pune (16%) & Bengaluru (15%), together accounted for over three-fourths of the GLV recorded in Q1 2022. Hyderabad recorded the highest net absorption among the top seven cities, followed by Pune: both surpassed the net absorption in Bengaluru for Q1. Moreover, the cities of Chennai, Hyderabad, and Pune witnessed a healthy growth in net absorption when compared to the previous quarter. Hyderabad and Pune were driven largely by the new completions in Q1 which came on stream with healthy pre-leasing levels. The office markets of Hyderabad (23.6%), Pune (23.8%), and Bengaluru (22.9%) headlined new completions in the quarter accounting for about 70% of the total supply addition. Almost 39% of the supply coming on stream in Q1 from these three cities was already pre-committed. Vacancy up Given the significantly high completions in Q1 2022, the pan-India vacancy has jumped by 80 bps quarter-on-quarter to 16.1%. Due to a steady pipeline of assets coming on stream, the demand-supply gap has momentarily widened. While the headline vacancy may be a bit disconcerting, core office markets in the major cities continue to have tighter vacancies compared to the city overall numbers and Pune see faster revival in return to workplaces
Tags : Post-pandemic Flex Leasing All-time High JLL’s Office Market Chennai Hyderabad Pune Rahul Arora Head of Office Leasing Advisory India JLL