Office rentals remained stable across the major markets in India in Q2 2021.
After almost 18 months of COVID-19 pandemic, the top six cities across the country recorded 10.3 million sq ft of office gross absorption in Q3 2021 which was an increase of almost 89 percent QoQ with occupiers planning for a gradual re-entry and closing deals that were on hold, leveraging tenant favourable market dynamics, as per data shared by Colliers.
Hyderabad emerged as the market leader in terms of office sector demand in Q3. The city witnessed a rise in demand for office space to 2.5 million square feet, from 1.9 million square feet.
After an average performance in Q2 2021, Hyderabad emerged as one of the resilient cities in terms of demand-supply dynamics. For the first time, Hyderabad had the maximum share in leasing volume at 2.5 million sq ft surpassing Bengaluru, as occupiers focussed on large block share in leasing volume accounting for 66 percent of the total demand in Hyderabad.
Rai Durg saw the maximum leasing traction accounting for 53 percent of the demand, while Hitec City contributed 40 percent.
As per the data, gross leasing in Bengaluru fell to 2.1 million square feet in July-September 2021, from 2.5 million square feet in the year-ago period. In Chennai, the leasing rose to 1.3 million square feet, from 0.8 million square feet.
Absorption of office space in Delhi-NCR went up to 1.5 million square feet, from 0.9 million square feet. The leasing transactions in Mumbai fell to 1.2 million square feet, from 1.4 million square feet.
In Pune, the gross leasing increased to 1.7 million square feet during the third quarter of this calendar year, from 0.3 million square feet in the corresponding period of the last year.
Robust leasing activity observed in flexible workspace sector
Leasing share by flexible workspace operators also rose in Q3 2021 owing to high demand from occupiers looking for managed spaces and short-term leases to tide over uncertain times.
Share of flexible workspaces in leasing increased to 26 percent in Q3 2021. Leading flexible workspace operators focussed on signing large block deals exceeding 100,000 sq ft in almost all major cities seeing increased interest from corporates for managed spaces. Pune accounted for the highest share in flexible workspace, followed by Hyderabad.
Highest supply since Q2 2020
The quarter saw the highest supply since Q2 2020 at 10.8 million sq feet in Q3 2021 with Hyderabad and Pune contributing the maximum share at 29 percent and 25 percent respectively. The second wave did not have a major impact on the construction activity. Developers continued to focus on leasing existing stock and received OCs for buildings with pre-commitments.
“The quarter has brought in much-needed cheer for the market. Large deals made a comeback, led by demand from flexible workspace operators. Decision-making by occupiers has become quicker than in 2020. We can expect the optimism to strengthen over the upcoming quarters, provided there is no third wave. Occupiers who were exploring renewal options have begun looking for fresh space,” said Ramesh Nair, Chief Executive Officer, India & Managing Director, Market Development, Asia, Colliers.