Office gross absorption across the top six cities in 2021 was at about 33 million sq feet, 10% higher compared to 2020. Also, leasing by start-ups accounted for about 2.2 mn sq ft which is a rise of 56% from 2020, a report by Colliers has said.
Hyderabad leaped to the top three cities, led by some large block deals in Q3 2021, according to the report. Bengaluru accounted for the highest share at about 30%, followed by Delhi-NCR and Hyderabad at 19% and 18%, respectively.
Flex spaces gained a significant share at 15% followed by the engineering and manufacturing sector at 12%. IT-BPM and technology sector remained dominant at 40% of the overall demand and buoyed the growth in leasing. Bengaluru accounted for maximum flex space leasing, followed by Hyderabad and Pune, the report said.
Pan-India absorption of commercial space during the year surpassed the annual gross absorption during 2016-2018 by 7%, signalling a strong revival in occupier confidence. Occupancy levels rose in prominent office micro markets across the top 3 cities at the end of 2021 from Q3 2021, led by a gradual revival in demand and fewer occupier exits.
“Hyderabad leaped to the top three cities, led by some large block deals in Q3 2021. Bengaluru accounted for the highest share at around 30%, followed by Delhi-NCR and Hyderabad at 19% and 18% respectively. Flex spaces expanded at a fast pace this year led by occupiers’ hybrid and decentralised work plans.
"During the year 2021 flex spaces leased about 4.8 million sq feet of space, a 60% rise YoY. Flex space leasing accounted for 15% of the leasing, compared to the 9% share last year. Bengaluru accounted for maximum flex space leasing, followed by Hyderabad and Pune,” said Arpit Mehrotra, Managing Director, Office Services (South India) at Colliers.
Submarkets such as NCR’s MG Road, Mumbai BKC and Bengaluru’s SBD and Whitefield saw higher occupancy QoQ after a gap of at least six quarters. At the same time, total pan-India vacancy levels stood at 18.5%, a merely 40-basis point increase from Q3 2021.
In terms of new supply, 2021 saw 35 million sq feet of supply, almost at similar levels of 2020 as developers exercised ‘wait-and-watch’ and aligned new supply in response to market demand.
Operators are leasing space for new centers in suburban and peripheral locations as occupiers explore and adopt the decentralised way of working with hub and spoke-style offices, aligning with business continuity plans, the report said.
“Office leasing activity in Pune has seen a noteworthy recovery in the second half of 2021 concluding the year with 4.71 MSF of gross absorption, which has been the city’s decadal average absorption from 2011 to 2020. Demand drivers predominately remain as IT& IT-es and flex spaces," said. Animesh Tripathi, Managing Director, Office Services (Pune), Colliers.
Delhi-NCR leasing up 50% led by demand for next-gen offices
Delhi NCR registered a 50% increase in leasing activity in 2021 on a YoY basis. Gurugram accounted for almost 64% share in leasing activity as many firms relocated to better quality buildings in upcoming micro markets such as Golf Course Extension Road and also centralized locations like Cyber City and MG Road.
Recently delivered buildings are witnessing greater traction as occupiers consolidate their portfolios in Grade A buildings with better wellness standards. A similar trend is seen in other cities where occupiers are exploring next-generation offices to move into as developers and occupiers are committed to future-proof office spaces, the report said.