The year 2022 is likely to emerge as the best year in terms of office space leasing, with the top-6 cities – Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune expected to cross 50 million sq ft. According to a report by Colliers India, the uptick in leasing is due to the slowdown in demand for the past two years.
“Occupants who were postponing their leasing decisions during 2020 and H1 2021 are now becoming even more optimistic about leasing space. While hybrid working remains a mainstay, occupiers are not shying away from leasing out new larger spaces,” said Colliers India said in the report.
It added that office absorption has already touched 40.6 million sq ft during Q1-Q3 2022, a two-fold increase from the same period last year, which saw the lockdown due to COVID-19. The large markets of Bengaluru, Delhi-NCR and Mumbai accounted for nearly 67 per cent of the total absorption, driven by strong demand from tech and flex players.
“Demand in Bengaluru, Delhi-NCR and Chennai has already surpassed the highs seen in 2019. Mumbai, Hyderabad and Pune are also heading towards reaching historic levels by the end of the year,” the report said.
Ramesh Nair, CEO (India) and Managing Director (Market Development-Asia), Colliers, said, “We are in an exciting phase in a market where demand and supply are picking up. Tech companies and flex operators accounted for nearly 50 per cent of total demand during the first three quarters of this year. Vacancies decreased by 30 basis points for the second time in a row during the quarter amid strong growth in the office market.
Nair said Indian companies, both startups and large companies, are eyeing office expansion. However, concerns about bearish pressures in global markets are visible at large and it needs to be seen how they will affect the decisions and confidence of occupants towards the end of the year. Inquiries/requests may see slight dent in the near future.
“The year also saw over-supply in the market, with new closings rising 1.5X YoY to 32.8 million sq ft. This led to an emphasis on leasing, as many buildings had pre-commitments. Bengaluru and Hyderabad accounted for 1/4th each of the total supply during the year,” the report said.
Colliers also said that leading tech and flex occupiers leased 19.8 million sq ft of space during the year, which is almost half of the total leasing in the top-6 cities.
“Being the leading startup and tech hubs, Bengaluru and Pune were the most preferred destinations for top flex operators to expand their portfolios. Bengaluru accounted for 31 per cent stake in the total flex leasing during YTD2022, followed by Pune with 25 per cent. Consulting and engineering firms are also actively leasing out spaces in cities, as most of them have returned to offices post COVID-19,” the report said.
Vimal Nadar, Senior Director and Head (Research), Colliers India, said, “The third quarter has further strengthened the growth momentum set at the beginning of the year. Consistently stable demand could lead to a significant increase in rentals in the coming quarters. Flex space continues to grow and more people are taking up space in these centers and this trend is likely to continue.”
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