New Delhi Opening up of offices and reduced infections, post the Omicron surge has seen office space leasing (also called gross absorption) across key cities increased to around 10.8 – 13 million sq ft for January–March 2022; an increase between 25 per cent and 97 per cent, y-o-y, different estimates maintain.

Flex spaces are witnessing increased demand across the key cities.

Market sources say the rental values are up 1 to 5 per cent in Pune and Bengaluru; while it has remained stable in Chennai, Hyderabad and Ahmedabad. Decline was reported in Delhi–NCR, Mumbai and Kolkata (in 1 to 3 per cent range).

The supply stood at 9.4 – 14.3 million sq ft. Vacancies have remained stable at 18.5 per cent between Q4CY21 and Q1CY22.

According to CBRE South Asia, a real estate consulting firm, the sector “witnessed robust recovery” and “leasing activity grew by 97 per cent y-o-Y to touch 11.4 million sq ft”. Knight Frank India observed that 10.8 million square feet of office space was transacted in Q1 (25 per cent y-o-y growth). Colliers India pegged the gross absorption at 13 million sq ft.

“We expect the office segment to return to its pre-Covid momentum in the next few quarters as the economy continues to strengthen. The significant increase in hiring and the pent-up demand of the past eight quarters, are expected to drive market volumes during the year,” Shishir Baijal, Chairman and Managing Director, Knight Frank India said.

Bengaluru, Chennai and Delhi-NCR dominated absorption during the quarter, accounting for almost two-thirds of the transaction activity. Bengaluru saw 5 million sq ft of space absroption, a 5 per cent increase y-o-y, and the highest amongst the three key cities.

Mumbai was the only market that saw a decline of 24 per cent in leasing activities with 900,000 sq ft being leased in Q1.

Technology corporates drove leasing with a share of about 32–34 per cent, followed by BFSI firms (17 per cent), engineering & manufacturing (12 per cent) and research, consulting & analytics firms (11 – 12 per cent).

Demand for flex spaces

Incidentally, flex space demand has seen a 13–15 per cent growth of the gross leasing activity. Share of flex spaces was about 5 per cent in the year-ago-period. Mainstream corporates continue to explore managed offices, and this has led flex spaces to open new centers in metros and even in non-metro cities.

Amongst the large-sized deals, flex spaces account for about 20 per cent.

Pune has seen a spurt in leasing by flex spaces, accounting for about 52 per cent of the leasing by flex spaces. Bengaluru, Hyderabad (7–12 per cent) and Mumbai (12–21 per cent) also saw major leasing activities in the segment. Other cities where flex spaces gained popularity include Kochi (57 per cent of total leasing activity), Kolkata (25 per cent) and Ahmedabad (20 per cent).

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