Office leasing may cross 50 mn sft in 2022: Colliers

Mumbai: The year 2022 is likely to emerge as the best year in terms of office space leasing, with absorption likely to cross 50 million square feet across the top 6 cities. The spurt in leasing is driven by a spillover in demand from the last two years. Occupiers that were postponing their leasing decisions during 2020 and January-June (H1) of 2021 are now being even more optimistic about leasing space.

While hybrid working continues to be the mainstay, occupiers are not shying away from leasing new large spaces. The top six cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune. Burgeoning office space demand in larger markets Office absorption has already touched 40.6 million sft during Q1-Q3 2022, a two-fold increase from the same period last year which witnessed lockdowns.

The larger markets of Bengaluru, Delhi-NCR and Mumbai accounted for around 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 high seen in 2019. Mumbai, Hyderabad and Pune are also inching towards reaching historical levels by the end of the year.

Arpit Mehrotra, Head of Flex, Colliers India says, "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. Vacancy levels lowered during the quarter for the second time in a row by 30 basis points amidst robust office market growth."

Moreover, Indian firms both startups and large firms are eyeing office expansions. However, the concerns around recessionary pressures in the global markets continue to look at large and it needs to be seen how they will impact occupiers' decisions and confidence towards the end of the year. We could see a slight dent in enquiries/demand in the near term, he said.

The year also saw greater supply in the market, with new completions rising 1.5 times YoY to 32.8 mn sft. This gave a thrust to leasing, as many of the buildings had prior pre-commitments. Bengaluru and Hyderabad accounted for one-fourth share each in total supply during the year. Tech and flex boosting office space demand.

Leading tech and flex occupiers leased 19.8 mn sft of space during the year, accounting for nearly half of the total leasing across the top six cities. 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 YTD2022, followed by Pune at 25 per cent share.

Consulting and engineering firms have also been actively leasing spaces across cities, as most of them have returned to office post Covid. Vacancy levels declined on a quarterly basis to 16.7 per cent, led by robust demand amidst limited new building completions. Higher enquiries and pre-commitments are likely to keep vacancy levels rangebound in the next three months.