Office space absorption touched 40.6 million sq ft during Q1-Q3 2022, a two-fold increase from the same period last year which witnessed lockdowns due to COVID-19 and leasing is expected to cross 50 million sq ft across the top six cities, a new report has said.
The top six cities included Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune.
The spurt in leasing is driven by a spillover in demand from the last two years. Occupiers who had postponed their leasing decisions during 2020 and H1 2021 are now being even more optimistic about leasing space. While hybrid working continues to be the mainstay, occupiers are not shying away from leasing new large spaces, said the report by Colliers India.
The larger markets of Bengaluru, Delhi-NCR and Mumbai accounted for around 67 percent of the total absorption, backed by robust demand from tech and flex players. Demand in Bengaluru, Delhi-NCR and Chennai has already surpassed the earlier high seen in 2019. Mumbai, Hyderabad and Pune are also inching towards reaching historical levels by the end of the year, the report said.
“Tech companies and flex operators together accounted for about half of the total demand during the first three quarters this year. Vacancy levels lowered during the quarter for the second time in a row by 30 basis points amidst robust office market growth. Moreover, Indian firms both startups and large firms are eyeing office expansions. However, the concerns around recessionary pressures in the global markets continue to look large and it needs to be seen how they will impact occupiers’ decisions and confidence towards the end of the year. We could see a slight dent in enquiries/demand in the near term,” said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
The year also saw greater supply in the market, with new completions rising 1.5X YoY to 32.8 mn sq feet. This gave a thrust to leasing, as many of the buildings had prior pre-commitments. Bengaluru and Hyderabad accounted for one-fourth share each in total supply during the year, it said.
Leading tech and flex occupiers leased 19.8 mn sq feet of space during the year, accounting for nearly half of the total leasing across the top six cities. Being a leading startup and tech hub, Bengaluru and Pune were the most preferred locations for top flex operators for their portfolio expansion.
Bengaluru accounted for a 31 percent share in total flex leasing during YTD2022, followed by Pune at a 25 percent share. Consulting and engineering firms have also been actively leasing spaces across cities, as most of them have returned to office post-COVID.
Vacancy levels dipped 30 basis points
Vacancy levels declined on a quarterly basis to 16.7 percent, led by robust demand amidst limited new building completions. Higher enquiries and pre-commitments are likely to keep vacancy levels range-bound in the next three months, the report added.
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