The year 2022 is likely to emerge as the best year in terms of office space leasing, with absorption likely to cross 50 mn sq ft across the top 6 cities — Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune. The spurt in leasing is driven by a spillover in demand from the past two years according to a report by Colliers India.
“Occupiers that were postponing their leasing decisions during 2020 and H1 2021 are now being even more optimistic about leasing space. While hybrid working continues to be the mainstay, occupiers are not shying away from leasing new large spaces," Colliers India said in the report.
It added that office absorption has already touched 40.6 milion sq ft during Q1-Q3 2022, a twofold increase from the same period last year, which witnessed lockdowns due to COVID-19. The larger markets of Bengaluru, Delhi-NCR and Mumbai accounted for around 67 per cent of the total absorption, backed by robust demand from tech and flex players.
Demand in Bengaluru, Delhi-NCR and Chennai has already surpassed the earlier high seen in 2019. Mumbai, Hyderabad, and Pune are also inching towards reaching historical levels by the end of the year.
Ramesh Nair, CEO (India) and Managing Director (market development-Asia) of Colliers said, “We are at an exciting stage in the market wherein demand and supply are ramping up. Tech companies and flex operators together accounted for about 50 percent of the total demand during the first three quarters of this year. Vacancy levels lowered during the quarter for the second time in a row by 30 basis points amidst robust office market growth."
Nair added that Indian companies, both startups, and large ones, are eyeing office expansions. However, the concerns around recessionary pressures in the global markets continue to look at large and it needs to be seen how they will impact occupiers’ decisions and confidence towards the end of the year. There could be a slight dent in enquiries/ demand in the near term.
The year also saw greater supply in the market, with new completions rising 1.5 YOY to 32.8 mn sq ft. This gave a thrust to leasing, as many of the buildings had prior pre-commitments. Bengaluru and Hyderabad accounted for 1/4th share each in total supply during the year.
Colliers said leading tech and flex occupiers leased 19.8 mn sq ft of space during the year, accounting for nearly half of the total leasing across the top-6 cities. “Being a leading startup and tech hub, Bengaluru and Pune were the most preferred locations for top flex operators for their portfolio expansion. Bengaluru accounted for a 31 percent share in total flex leasing during YTD2022, followed by Pune at a 25 percent share. Consulting and engineering firms have also been actively leasing spaces across cities, as most of them have returned to office post-COVID-19.
Vimal Nadar, Senior Director and Head (research) at Colliers India, said, “The third quarter has further reinforced the growth momentum set out at the beginning of the year. A consistent stable demand can lead to a meaningful increase in rentals in the coming quarters. Flex space has consistently grown with large occupiers taking space in these centers and this trend is likely to continue."
