'Office space leasing in 7 cities to reach 95% of pre-Covid level in FY23'

Net leasing of the office space across seven major cities will reach 90-95 per cent of the pre-COVID-19 level during the next financial year, on fresh hiring and return of employees to workspace, according to rating agency Crisil.

Net leasing refers to the absorption of new office space less space vacated by tenants.

"Net leasing of commercial office space (Grade-A) will reach 90-95 per cent of the pre-pandemic level next fiscal, up from an estimated 70-75 per cent in the current one, with a return to office gathering steam and new hiring picking up strongly," it said in a statement.

The increase in net leasing and steady rental collections, which had not fallen significantly, will ensure that the credit profiles of commercial real estate owners remain stable, Crisil said.

Net leasing during the last fiscal almost halved to 20 million square feet as absorption of new spaces was tepid and some tenants even vacated office premises, the agency said.

"Leasing remained modest in the first half of this fiscal, too. With supply exceeding demand, market occupancy reduced to 85 per cent in September 2021, from the pre-pandemic mark of around 89 per cent in March 2020.

"That said, the leasing activity is expected to pick up from the fourth quarter of this fiscal and occupancy to improve to around 87 per cent next fiscal, closing in on the pre-pandemic level," the statement said.

The top-seven cities -- Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, Delhi-NCR and Pune -- have an operational stock of around 625 million square feet as of March 2021.