Office space renewals gaining pace; NCR, Bengaluru most resilient

Occupiers are negotiating and renewing spaces, while postponing fresh leasing decisions, it said.

Bengaluru followed by Mumbai witnessed the highest share of term renewals post the pandemic. Pune, followed by Hyderabad saw the steepest decline in leasing post pandemic, it said.

The report observed that while leasing has declined from April 2020, NCR and Bengaluru emerged as the most resilient office markets. Secondly, occupiers are renewing existing spaces, while postponing fresh leasing decisions. Thirdly, BFSI companies are continuing to expand their footprint, post pandemic.

Leasing refers to overall space uptake in all commercial buildings across all grades, in the top six cities. It includes fresh transactions, renewals, and leasing of retail spaces in commercial office buildings. Lease transactions are recorded basis registered deeds.

Occupiers are looking to be in new-generation offices with modern amenities with focus on health and wellness. There will be more emphasis on flexibility, with occupiers keen to explore co-working spaces for a decentralized workforce.

Delhi NCR and Bengaluru emerged as the most resilient cities post pandemic. Southern cities accounted for 52% of the leasing post pandemic, the report said.

Delhi-NCR was the only city that saw IT sector’s share increasing. Mumbai saw BFSI sector overtaking IT sector’s leasing post pandemic. Bengaluru, Chennai and Mumbai seeing traction from BFSI companies led by global in-house centers, and insurance firms.

The future is hybrid. Office usage patterns will change, and occupiers will become nimble to maximize efficiency. As occupiers devise their strategies, developers too will become more adaptable, the report said.

BFSI sector gaining ground

Global and domestic BFSI firms expanded their real estate footprint post pandemic. BFSI firms accounted for 15% of the total share in leasing post pandemic, from 10% share before. Bengaluru, Chennai and Mumbai seeing traction from BFSI companies led by global in-house centers, and insurance firms. Mumbai saw the BFSI sector overtaking the IT sector’s leasing post pandemic.

As for co-working, the overall leasing share fell to 4% as operators avoided speculative development, post pandemic.

"Occupiers are using the current favourable market dynamics to negotiate renewals. They are looking at more flexibility in leases too. Occupiers’ decisions are quicker than last year, with a focus on new-generation offices. Re-entry of employees has started in India, with many companies planning to get back more employees from January 2022. This will prompt occupiers to make leasing decisions quicker,” said Ramesh Nair, Chief Executive Officer, India and Managing Director, Market Development, at Colliers India.

“Occupiers are gradually getting back to their offices, but high-density office space may be a trend that has peaked. COVID-19 may also accelerate a trend from leasing office space in the CBD to suburbs. Corporates will face a challenge to design and modify existing office space to support a company’s established culture while following the new health protocols & yet promote social interaction & collaboration,” said Raja Seetharaman, Co-founder, Propstack.