It’s back to office! After months of pandemic-related disruptions, things are back to normal, and even better from the real estate sector’s point of view. Though work-from-home and hybrid work cultures are still being resorted to in parts, the majority of offices have reopened their doors to employees with full regularity. This has led to a boom in the demand for office spaces, which has spurted to record levels, going by the recent research reports, surveys and opinions of industry insiders.
What has given further thrust to office leasing is the requirement of additional work space by the majority of companies, keeping in view the post-pandemic compulsions. Social distancing, which became a norm during the past two years, is being adhered to by most of the establishments to ensure the safety, as also to win the trust, of their workforce. Hence, besides being a place with larger space, the concept of office has also evolved now with a view to creating a fine balance between safety, constructive collaboration, and overall work efficiency.
Unsurprisingly, the healthy data of office space absorption during the past few months has spread cheer among commercial real estate players and they are hopeful of witnessing even better numbers in the months to come. Most of the findings of industry reports also reveal that Bengaluru, Delhi-NCR, and Hyderabad dominated the office space absorption in Q2 and accounted for nearly two-thirds of the overall transaction activity. Key sectors driving absorption included technology corporates, flexible space operators and engineering & manufacturing firms.
According to ‘CBRE India Office Figures Q2 2022’, the office sector leasing in India recorded the highest-ever activity with a strong performance in Q2 2022, which grew by 61 per cent to record 18.2 million square feet. Bengaluru led the office space absorption with 5.6 million sq. ft., followed by Delhi-NCR at 3.9 million sq. ft. and Hyderabad at 2.6 mn sq ft, stated the report.
The report also highlighted that office space take-up in Q2 was driven by small- (less than 10,000 sq. ft.) to medium-sized (10,000-50,000 sq. ft.) transactions. Due to decreasing vacancy and rising demand for premium assets, a rental increase of about 1-5 per cent Q-o-Q was recorded across multiple micro-markets in Delhi-NCR, Chennai, Bengaluru and Pune.
Reporting about office gross absorption across the top six cities, a Colliers report said it witnessed almost a three-fold rise to 14.7 million square feet during Q2 2022 as compared to the same period last year. The strong streak seen at the beginning of the year continued in the second quarter unabated, rising 14 per cent Q-o-Q.
The Colliers report further said that pan-India absorption has already surpassed 27 million square feet in the first half of the year, signaling a strong revival in occupier demand. All the major markets saw strong leasing activity during the quarter, driven by high occupier demand for large office spaces. Bengaluru led the leasing at 30 per cent share, while Mumbai and Delhi-NCR accounted for 19 per cent and 18 per cent- share, respectively.
An interesting aspect that emerged from a survey by industry body FICCI was that in sharp contrast to the other key cities, the ‘Other Services Sector’ in NCR accounted for a major share of the total leasing. It chiefly consisted of occupier segments like learning and education, healthcare, and other diversified business conglomerates.
Commenting on the same, Ajendra Singh, VP, Sales and Marketing, Spectrum Metro, said, “A healthy increase in office occupancy is a welcome development and a huge morale-booster for developers, particularly in the commercial segment. In some markets, the demand has significantly outpaced supply, indicating a complete revival of the segment. The rise in occupancy levels leads to the firming up of rentals, attracting a higher number of investors. All these are very positive developments.”
“The record-breaking Q2 numbers in the office segment are extremely heart-warming,” said Deepak Kapoor, Director, Gulshan. “With pandemic-related curbs having virtually become a thing of the past, the employers have given up the reluctance of the recent past and the staff is also feeling more confident to get back to work. All these are encouraging signs but we, as developers, don’t have to be complacent. As responsible corporates, we have to deliver as per the needs of the changed times. No doubt, it’s an onerous job, but we are confident of accomplishing it.”
Applauding the remarkable performance of the office segment during the second quarter, Harpal Singh Chawla, Director, Spaze Group, said these should not be looked at in isolation. “The highest-ever activity witnessed in the office sector leasing in India is a manifestation of the overall improvement in economic situation in the country. A series of steps taken by the Government on the healthcare front, coupled with the resilience shown by various sections of the industry, have made this recovery possible. While striving to outperform ourselves, we should be careful enough to not let our guard down.”
The sentiments manifest signs of a matured real estate industry that has withstood the biggest challenge of its time to emerge victorious; an industry which is ready to traverse the road ahead with aplomb.