Gross absorption of Grade A office space touches 4.3 million sq ft; declines by half in Q1 2021: Colliers

The net office absorption in 2020 across the top six Indian cities was 20.6 million square feet, a decline of 42.8 percent YoY. Technology firms remained the major demand drivers, with about 45 percent of the demand from large occupiers in recently completed projects offering better wellness and hygiene standards.

"We believe demand in 2021 to be driven by mainly technology (IT-BPM), and engineering and manufacturing sectors. With demand likely to increase substantially for services in artificial intelligence, machine learning and robotics, we believe that technology companies will expand their office portfolio over the next three years as Indian talent is being considered favourably for high-end R&D activities,” said Arpit Mehrotra, Managing Director, Office Services (South India) at Colliers.

Flexible workspace operators to lease about 3 million square feet in 2021

As of the end of February 2021, the total flexible workspace stock stood at 30 million square feet, across the top six Indian cities out of which Bengaluru, Hyderabad and Mumbai accounted for the bulk. During 2021, Colliers forecasts that flexible workspace operators will lease around 3 million square feet (279,000 square meters), similar to 2020.

However, in 2022, they expect a pick-up in demand for well-located, high quality and efficient flexible workspaces, resulting in their occupying 5.4 percent of the total commercial office portfolio in India.

During 2020, institutional investments worth Rs 35,835 crore were recorded despite a muted activity during Q2 2020. Investors continue to be bullish on the Indian real estate sector and asset classes such as offices, data centres and warehouses are receiving increasing interest.

During 2020, 46 percent of the total inflows accounting for Rs 15,450 crore were in the office market, signifying investors’ unwavering confidence in the commercial office asset class despite India’s continuing work from home scenario.

Between 2018 and 2020, commercial office assets accounted for over 55 percent of the total investments in Indian real estate, showing the high appetite of investors. The top six Indian cities saw an average annual supply of over 35 million square feet between 2018 and 2020 with the majority being snapped up by institutional investors.

The survey points out that over the next five years workplaces are expected to revolve around the following three themes as enterprises strive to maintain a corporate culture that attracts and retains top talent.

Place: Portfolio optimisation will likely be the over-arching theme in 2021 and 2022 as occupiers explore strategies to optimise an efficient corporate real estate portfolio that looks at having multiple offices closer to the employees' residences rather than consolidating in distant locations.

Space: Occupiers are likely to transition from fixed space in workplaces to evolving spaces, according to the needs of the enterprise at different times with a focus on health and wellness of their employees.

Pace: Occupiers are accelerating technology adoption in the workplace to make better collaboration and efficiency possible, as well as boost overall productivity and pace of work. Environmental sustainability and reducing carbon footprint will also drive occupiers’ choice of offices.

“The future workplace is going to be the catalyst for growth & innovation. The functionality of workplace is going to shift from 'place of work' to 'place where people meet, and ideas generate.' It is the collaboration of design and technology which will drive the future workplace," said Ashish Puri, Director, Interior Design Services (India), at Colliers.

While sustainability has always been an agenda driven by climate change, investments in environmental, social and governance (ESG) have gained momentum in the past few years. Colliers recommends green technologies that can be used in commercial office buildings by developers and occupiers.

“As India enters the second wave of the pandemic in India, Colliers’ survey shows that two main aspects respondents miss as they work remotely is their relationship with colleagues in office, and the separation of home and office dimensions. We believe that the workplace while essential, is likely to significantly shift over the next five years. Offices are likely to become places for collaboration, rather than simply workspaces, with most occupiers choosing a hybrid model of working where employees go to the office only a few days a week,” said Siddhart Goel, senior director and head, Research at Colliers India.