As companies start reopening the doors to their employees after three waves of COVID-19, the gross absorption for office space jumps almost three-fold to about 13 million sq ft in the first quarter.
The vacancy in Grade A office markets across the top six cities has remained stable at 18.5 percent, according to an April 5 report.
The office realty began picking up since the second half of 2021, with the momentum continuing onto the first quarter of 2022. This has been led by large deals returning to the market, well supported by an infusion of quality supply across the prominent markets, it noted.
Bengaluru continued to be the top market with a share of 31 percent of the overall Grade A absorption during the quarter. Pune, interestingly, pipped larger markets to grab the second spot along with Hyderabad at 17 percent each. Compared to other cities, demand momentum in Delhi-NCR and Mumbai was relatively slower, as few large deals have been pushed to later quarters.
During the period, supply doubled to about 14.3 million sq ft. The new supply was led by Bengaluru with a share of 29 percent of the pie. This was followed by Chennai and Pune with 22 percent each.
“This quarter has seen occupier confidence swinging back with considerable large-sized deals that accounted for a whopping 55 percent of the leasing during the quarter. This clearly shows that occupiers are consolidating offices as they prepare for workplace-led innovation and collaboration.
"This strong leasing comes at a time when occupiers in India have started opening their doors to employees after a hiatus of two years. The second quarter of 2022 will be crucial as we expect more companies to open up workplaces. If the overall leasing momentum continues, then the year 2022 is likely to be a promising year,” said Ramesh Nair, CEO for India and Managing Director of Market Development, Asia, Colliers.
Flex spaces expand rapidly, with a 15% share in leasing
Overall, technology companies continued to account for a dominant share, with a 32 percent stake of the gross absorption. Flex space saw its share increasing to about 15 percent from 5 percent year-on-year, led by strong demand from occupiers for flex spaces and the associated flexibility in leases that come with it.
Mainstream corporates continue to explore managed offices, and this has led flex spaces to open new centres in metro cities and even in non-metro cities. Consulting and occupiers in the engineering and manufacturing sector accounted for 12 percent each of the gross absorption respectively, the report said.
Flex spaces are taking up large spaces across cities. Among the large-sized deals, flex spaces accounted for about 20 percent, lagging only behind the technology sector. Pune has seen a spurt in leasing by flex spaces, accounting for about 52 percent of the leasing by flex spaces, said Vimal Nadar, Senior Director and Head of Research at Colliers India.
"Bengaluru, Hyderabad and Mumbai accounted for 12 percent each of the total leasing by flex spaces. Flex space operators are focusing on customisation and providing on-demand workspaces, attracting small and large occupiers alike,” he said.
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