Real estate trends 2022: Gross absorption of office space may touch 50 mn sq ft in 2022; to moderate in 2023

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While gross absorption for commercial office space is expected to touch 50 mn sq ft in 2022 after two years of demand slowing down, the year 2023 is likely to see some moderation with gross absorption anticipated to close at 35 to 38 mn sq ft on the back of global cues, a report by Colliers has said.

Bengaluru is likely to account for about 33 percent of the gross absorption, followed by Delhi-NCR at 18 percent and Hyderabad at 15 percent in 2022, it said.

In 2023, slow decision-making could result in leasing activity of about 35-38 mn sq feet but Bengaluru followed by Hyderabad is expected to see most of the new supply across the top six cities, it said.

"The year 2023 may see slow decision-making leading to leasing activity of about 35-38 mn sq feet.  Bengaluru followed by Hyderabad are expected to see most of the new supply across the top six cities, "says Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.

The top six cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune.

The global consultant also noted that upgradation of offices will be a recurring theme. Landlords and occupiers will be looking to upgrade offices. Across the top six cities, office stock of about 118 million sq feet holds potential for upgradation, accounting for 19 percent of the total office stock.

It said that there may be a slight dent in enquiries and demand in the near term amidst global economic headwinds. Provided the demand remains stable and consistent in the first half of 2023, rentals are likely to pick up from the second half of the year.

Flex operators are likely to lease 7 mn sq feet by the end of 2022, touching the highest ever in the country, after 2019. This represents a two-fold increase from 2021 as flex space has seen immense demand from medium and large enterprises this year.

Occupiers approaching their lease expiry are exploring flex spaces as it offers them greater amount of flexibility. As per a C-Suite Survey conducted by Colliers and Awfis, about 77 percent of the occupiers are planning to incorporate flexible workspaces in their portfolio.

"New supply is expected to increase by about 25 percent to 30 percent on a YoY basis during 2022, at about 44 mn sq ft. However, in 2023, developers are likely to step ahead with caution. Developers are likely to align new supply with the demand momentum. This will ensure the market equilibrium is not disturbed and vacancy levels remain range bound," said Vimal Nadar, Senior Director and Head of Research, Colliers India.