With leasing momentum indicating strong recovery and stability in commercial office markets in 2022, vacancy levels across the top 6 cities dropped by 190 basis points YoY to 16.6 per cent. According to a report by Colliers, vacancy levels have declined every successive quarter of 2022 and the total leasing during the year was noted at 50.3 mn sqft. Occupiers have, during the year, gone ahead with their expansion plans after having been in a wait-and-watch mode for two years, even as there was weakness in market activity in Q4 2022. The report said that the gross absorption in Q4 2022 was about 21 per cent lower than the average seen during Q1-Q3 2022.
“Interestingly, BFSI companies have expanded rapidly this year, with Indian banks as well as global financial institutions leasing large office spaces. Leasing by BFSI almost doubled since last year, accounting for a 14 per cent share in total leasing, equivalent to flex space,” said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers. He further added that Mumbai witnessed the highest BFSI leasing at 40 per cent share.
While 2022 saw an uptick in the leasing of commercial office space, developers will need to build collaborative and efficient office spaces in 2023 with a ‘greater focus on sustainability and technology’. “As firms are adopting a cautionary stance for 2023, it is the right time to start preparing for a future generation of workforce and focusing on creating progressive, flexible workspaces having a holistic outlook towards ESG,” said Peush Jain, Managing Director, Office Services, Colliers India.
City-wise growth
The top 6 cities included in the study are Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune. “Delhi-NCR recorded a growth of over 72 per cent from the previous year. The pent-up demand of 2020 & 2021 led to a significant rise in the gross absorption for 2022,” said Bhupindra Singh, Managing Director, North, Colliers. He also added that North India is witnessing greater activity from flex operators and the trend is being witnessed in tier-II towns, apart from Delhi-NCR.
Further, the year saw an infusion of 42.9 mn sqft of supply which is 23 per cent higher than the previous year as ‘developers focused on project completions’. “About half of the new supply was seen in Hyderabad and Bengaluru. In 2023, developers are likely to plan their ongoing and upcoming projects basis evolving demand trends to maintain overall market stability in terms of vacancy and rents,” said Vimal Nadar, Head of Research, Colliers India.
Leasing also increased by flex space operators who leased 7 mn sq ft in 2022, accounting for about 14 per cent share in total leasing. Bengaluru and Pune remained the popular locations for flex space operators contributing to more than 50 per cent flex space take-up of the year. In terms of industries, BFSI, consulting and engineering firms saw increased office space take-up with leasing by these three sectors doubling since last year. Othersectors included healthcare & pharma, FMCG and logistics firms. “The south markets – Bengaluru, Chennai, and Hyderabad – witnessed strong leasing during YTD 2022. Bengaluru has been the undisputed leader of office leasing in India for a while now and has maintained the streak in 2022 with 3.4 mn in Q4 2022,” said Arpit Mehrotra, Managing Director, Office Services, South India & Head of Flex | India, Colliers. Overall, Bengaluru closed at 16.3 mn sqft where gross absorption across the top 6 cities reached 50.3 mn sqft, Hyderabad did 6.5 mn sq ft which is 10 per cent higher than 2021 and Chennai accounted for 4.6 mn in 2022 which is 64 per cent higher than 2021, he added.