Office leasing activity could cross 50 mn sq ft in 2022: Colliers report

Despite the emerging trends in the co-working and hybrid spaces, office leasing activity is witnessing a spurt in demand. The year 2022 is likely to emerge as the best in terms of office space leasing as absorption is likely to cross 50 million sq ft across the top six cities, said a report by Colliers.

As the ill-effects of the pandemic recede, occupiers are more optimistic about leasing space as office activities increase.

Office absorption has already touched 40.6 million sq ft during the first three quarters of Calendar 2022, up two fold over the same period last year, which was marked by Covid-19 induced lockdowns.

The larger markets of Bengaluru, Delhi-NCR and Mumbai accounted for about 67 per cent 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 highs seen in 2019. Mumbai, Hyderabad and Pune are also inching towards historical levels by the end of the year.

“We are at an exciting stage in the market wherein demand and supply are ramping up. Tech companies and flex operators together accounted for about 50 per cent of the total demand during the first three quarters this year,” said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.

He said that vacancy levels lowered during the quarter for the second time in a row by 30 basis points amidst robust office market growth and  Indian firms, both startups and large firms are eyeing office expansions.

According to Ramesh Nair, the concerns around recessionary pressures in the global markets continue to look large and needs to be seen how it will impact occupiers’ decisions towards the end of the year.

“We could see a slight dent in enquiries/demand in the near term,” he said.

With the pent up demand for office leasing activity so far, this year, combination of hybrid and remote working where the innate thought is to bring back the social and people aspect of the office environment, the attractiveness of the Indian market would provide tailwind to demand in the last quarter,” said Peush Jain, Managing Director, Office Services, Colliers India.

The report findings highlight that 2022 also saw greater supply in the market, with new completions rising 1.5 times YoY to 32.8 mn sq feet. Bengaluru and Hyderabad accounted for 1/4th share each in total supply during the year.

As per the report, tech and flex boosting office space demand leading tech and flex occupiers leased 19.8 mn sq ft of space during the year, accounting for nearly half of the total leasing across the top 6 cities. The top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune.

Being leading Startup and Tech hubs, Bengaluru and Pune were the most preferred locations for top flex operators for their portfolio expansion. Bengaluru accounted for a 31 per cent share in total flex leasing during 2022, followed by Pune at 25 per cent share, the report said.

Consulting and engineering firms have also been actively leasing spaces across cities, as most of them have returned to office post covid. Moreover, vacancy levels have also declined on a quarterly basis to 16.7 per cent led by robust demand amidst limited new building completions.