Global recessionary concerns may delay recovery demand touching gross office space leasing of 30-33 million sq ft (msf) in 2023, according to a report by real estate consultant Colliers.
In an optimistic scenario, India’s office sector is likely to see about 35-38 msf of gross leasing in 2023, the report added.
The report, published in collaboration with the Federation of Indian Chambers of Commerce and Industry (Ficci), suggests that while the office market in 2023 looks uncertain, leasing activity is likely to pick up in the second half of the year, led by global capability centres, BFSI (banking, financial services and insurance) companies and startups with sound business models.
"In 2023, despite the office market being riddled with uncertainties, the office sector is poised for growth, provided the economic environment remains bright. We do not expect the leasing numbers to fall below the peak pandemic levels of leasing, even in a pessimistic scenario,” said Peush Jain, Managing Director, Office Services, Colliers India.
Slowdown affecting leasing portfolio
Due to the ongoing layoffs caused by slower external demand, a relative slowdown in overall traction is expected in 2023, particularly in the tech sector.
However, leasing by flex, engineering, and BFSI firms is expected to remain robust, the report added.
"Time will tell whether the office market will overcome recessionary concerns and establish itself in the latter half of 2023, or whether the economic headwinds will have a long-term impact. However, the market is resilient enough to bounce back, as it did during the pandemic," the report added.
Flex workspaces to remain upbeat
During 2022, flex operators in India leased 7 msf of Grade A office space, rising more than three-fold, compared to the pandemic levels.
Led by various employee-centric and operational benefits, occupiers are embracing a hybrid working model.
According to an occupier survey by Colliers on hybrid working in September 2022, 63 percent of the occupiers are embracing the hybrid working model, and this is only expected to increase.
Despite the ongoing flux in the tech sector, companies are likely to lease flex spaces due to the flexibility in leasing terms and short-lease tenure offered by flex players, easing capital expenditure, the report added.
“Occupiers are also likely to split their large offices into satellite offices, to bring offices closer to employees’ homes. As a by-product, the demand for flex spaces is likely to see an uptick. In the next few years, hybrid working is likely to pivot key office fundamentals, and will be especially critical for the growth of flex spaces,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
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