Office leasing to hit all-time high in 2022: Report
3 min read 01 Oct 2022, 12:49 PM ISTOffice leasing has jumped 97 per cent in Jan-Sep in 6 cities, according to Colliers. may hit record in 2022: This year the leasing may cross 50 million square feet taking the sector to an all-time high
PremiumAs the world returns to normalcy, office space leasing in India may reach an all-time high in 2022, hinted the real estate consultant Colliers. According to the firm, office spaces hiked by 97 per cent in six Indian cities.
These cities witnessed an increase in gross leasing of office space to 40.6 million square feet from January-September.
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The demand was majorly driven up by technology and co-working firms. Last year, the demand for office space stood at 20.6 million square feet across six cities, ie Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.
This year the leasing may cross the 50 million square feet mark in India's real estate sector. Last time, India experienced its biggest office space absorption phase in 2019 with an expansion of 44.8 million square feet.
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Notably, gross absorption does not include lease renewals. It also doesn't recognise pre-commitments and deals which are only limited to a letter of intent.
"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," Colliers India CEO Ramesh Nair told PTI.
According to Colliers India, the hike in leasing is the result of a spillover in demand from the last two years.
It was observed by the consultant company that the occupiers that were apprehensive of the market economy in 2020, continued to postpone their leasing decisions. Now, most of them are optimistic about leasing space.
Nair also highlighted the reduction of vacancy levels to 16.7 per cent at the end of the September quarter from 18.5 per cent in the January-March period of 2022.
Clouds of recessionary pressure may overshadow the leasing space boom
Despite a possible boom in office space leasing this year, Ramesh Nair remained realistic by addressing the looming threat of recession in the economy. He said that there are concerns about the recessionary pressures in the global markets, hence, remained speculative of its impact on occupiers' decisions and confidence towards the end of the year. He foresees a slight dent in inquiries/demand in the near term.
It is worth noting that central banks across the globe are raising interest rates to counter inflation. This may signal a recessionary pressure on the economy.
Tech and flexible space occupiers leased around 19.8 million square feet of space till September 2022. Most of the space was leased in the top six cities mentioned earlier.
Leasing transaction data also signals a similar year-over-year hike in the absorption of office space in all six cities during January-September 2022.
Bengaluru recorded a twin-fold hike to 12.8 million square feet
Among all the top-ranking cities, Bengaluru was the top gainer which recorded a more than two-fold hike in office space leasing to 12.8 million square feet from 6.3 million square feet during this period.
Besides Bengaluru, Chennai witnessed a 79 per cent rise in leasing to 3.6 million square feet. Talking about the country's capital, office space absorption jumped 160 per cent in the Delhi NCR region to 8.8 million square feet.
Hyderabad recorded a 51 per cent rise to 5.6 million square feet from 3.7 million square feet. In Mumbai, leasing doubled to 5.6 million square feet from 2.8 million square feet.
Pune crossed the 4 million square feet mark during the period to show a 73 per cent growth. The Colliers data has projected a 49 per cent rise in the new supply of office space to 32.8 million square feet during the first nine months of 2022.
(With inputs from PTI)
