Office space leasing is expected to grow by 30–35 per cent next year, property consultants said, on the back of demand seen over the last few months
Despite the Omicron variant of Covid-19 threatening to derail recovery, they believe commercial leasing is well on track to reach pre-pandemic highs by 2023.
“Overall, we estimate net absorption to rebound strongly, recording a 30–35 per cent growth to reach 29–31 million square feet (MSF) levels by the end of 2022, in line with the decadal average,” said Badal Yagnik, managing director, tenant representation, Cushman & Wakefield. “Overall, the office story is looking very promising in the year ahead.”
Fresh supply across the top eight cities could reach 45–46 MSF in 2022, a 13–15 per cent growth on an annual basis, which would also be 30 per cent higher than the decadal average. Companies gradually moved to bring employees back to offices in the second half of the 2021 even while sticking to the hybrid work model.
Bengaluru, Mumbai, Delhi-NCR, and Hyderabad will continue to dominate the new demand in 2022. “We expect markets such as Noida and Navi Mumbai to perform well, with growing interest from tech companies to set up larger centres. Pune and Chennai are also expected to bounce back strongly with growing occupier interest,” Yagnik said.
Nearly 25 per cent of the overall new supply in 2022 is already pre-leased and developers are expediting those projects.
In addition, active demand across the top eight cities has crossed 35 MSF, even surpassing the pre-Covid-19 peaks, in a signal that lead indicators are roaring back to life.
ICICI Securities believes that cumulative net office absorption of 75-80 MSF over calendar year 2022-24 compares well with overall upcoming Grade A supply of 114 MSF over the same period, of which 20-30 per cent may be shelved as it is speculative supply, leading to an effective supply of 80-85 MSF.
JLL also said that India’s office market is poised for a strong 30–35 per cent annual growth in 2022 on the back of growing traction for the IT industry at a time of increased tech spending and digital transformation from global corporations.
“Demand from other sectors such as BFSI and consulting is also likely to show some improvement even as other sectors such as ecommerce, manufacturing, and healthcare gain more strength,” JLL said. “Rents are likely to remain stable with an upward bias, particularly in prime office markets driven by mark-to-market renewals and new deals in premium quality projects.”
Major IT companies operating out of India have recently expanded their employee base. In 2019, the IT sector accounted for a quarterly average of 7 MSF of office space consumption, while the average office space leased across all sectors was 15 MSF.
According to international property consultant Knight Frank, the pandemic and subsequent lockdowns forced many companies to review their office space strategies.
“The office space consumption by the IT sector fell considerably during the lockdown-impacted Q2 and Q3 of 2020, with total space leased amounting to 2 MSF during this six-month period. However, with a return to normalcy in Q4 2020, the space take-up by this sector rose sharply to 8 MSF. From Q1 to Q3 2021, the IT sector leased a total of 8 MSF,” Knight Frank said.