Office space kicked into high gear as office work resumes

It’s back to school! After months of pandemic-related disruption, things are back to normal, and even better from a real estate industry perspective. Although working from home and hybrid working cultures are still in use in some regions, the majority of offices have reopened to employees with complete regularity. This has led to a boom in demand for office space, which has reached record highs, going by recent research reports, surveys and opinions from industry insiders.

What has given new impetus to office leasing is the requirement for additional office space by the majority of companies, given the post-pandemic compulsions. Social distancing, which has become a norm over the past two years, is followed by most establishments to ensure safety, but also to gain the trust of their staff. Therefore, in addition to being a place with a larger space, the office concept has also evolved now with a view to creating the right balance between safety, constructive collaboration and overall work efficiency.

Unsurprisingly, the strong office space absorption data over the past few months has sparked joy among commercial real estate players and they are hoping to see even better numbers in the months to come. Most industry report findings also reveal that Bengaluru, Delhi-NCR and Hyderabad led office space absorption in the second quarter and accounted for nearly two-thirds of overall deal activity. Some of the top take-up sectors include technology companies, flex space operators, and engineering and manufacturing companies.

According to ‘CBRE India Office Figures Q2 2022’, India’s office leasing industry saw the highest activity on record with a strong performance in the second quarter of 2022, which grew by 61% to a record 18 .2 million square feet. Bengaluru led in office space absorption with 5.6 million square feet, followed by Delhi-NCR with 3.9 million square feet and Hyderabad with 2.6 million square feet, the report said.

The report also highlighted that office space takeover in the second quarter was driven by small (less than 10,000 square feet) to medium (10,000 to 50,000 square feet) deals. Due to falling vacancy and increasing demand for high-end assets, rental increases of around 1-5% from the previous quarter were recorded in several micro-markets in Delhi-NCR, Chennai, Bengaluru and Pune.

Noting gross office uptake in the six major cities, a report by Colliers said it nearly tripled to 14.7 million square feet in the second quarter of 2022 compared to the same period the last year. The strong streak seen at the start of the year continued unabated in the second quarter, rising 14% quarter-on-quarter.

The Colliers report further states that pan-India absorption already exceeded 27 million square feet in the first half of the year, signaling a strong recovery in occupier demand. All major markets saw strong rental activity in the quarter, driven by strong user demand for large office space. Bengaluru led the leasing with 30% share, while Mumbai and Delhi-NCR had 19% and 18% share respectively.

An interesting aspect that emerged from a survey conducted by industry body FICCI was that, unlike other key cities, the ‘other service sector’ in the NCR accounted for a significant share of total rentals. It consisted mainly of occupier segments such as learning and education, healthcare, and other diversified business conglomerates.

Commenting on the same, Ajendra Singh, VP of Sales and Marketing, Spectrum Metro said, “A healthy increase in office occupancy is a welcome development and a huge boost for developers, especially in the segment. commercial. In some markets, demand has greatly exceeded supply, indicating a complete renaissance of the segment. Rising occupancy rates lead to stronger rentals, attracting more investors. All these developments are very positive.

“Record second quarter figures in the office segment are extremely heartening,” said Deepak Kapoor, director of Gulshan. “With pandemic-related brakes all but a thing of the past, employers have moved away from the reluctance of the recent past and staff also feel more confident to get back to work. All of these signs are encouraging, but we as developers don’t have to be complacent. As responsible companies, we must respond to the needs of changing times. Undoubtedly, it is an expensive job, but we are confident to accomplish it.

Hailing the remarkable performance of the office segment in the second quarter, Harpal Singh Chawla, director of Spaze Group, said they should not be viewed in isolation. “The highest activity ever seen in the office leasing sector in India is a manifestation of the overall improvement in the economic situation in the country. A series of measures 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 outdo ourselves, we must be careful enough not to let our guard down.

Sentiments show signs of a matured real estate industry that withstood the greatest challenge of its time to emerge victorious; an industry that is ready to walk the road with aplomb.

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