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BENGALURU : Startups leased about 2.2 million sq feet of office space in 2021 in the top three property markets of Delhi-National Capital Region, Mumbai and Bengaluru – a 56% rise from 2020.
The biggest spurt was seen in Delhi-NCR where start-ups leased office spaces in Gurugram largely, during a time when India saw 42 startups joining the unicorn club in 2021, according to property advisory Colliers India.
Overall office gross absorption across the top six cities was at about 33 million sq feet, 10% higher compared to 2020, as per Colliers. On a city level, all cities, except Bengaluru and Delhi-NCR have surpassed the annual average absorption of 2016-2018.
“The year 2021 has emerged to be better than expected, considering the devastating wave we saw during the year. Demand continues to be led by technology companies. However, we are seeing greater appetite for office space by start-ups. The year 2022 will even be better, even if the concerns of Covid-19 persist. Gross absorption in 2022 will be about 15-20% higher as occupier confidence is back in the market," Ramesh Nair, CEO, India and MD, market development, Asia, Colliers.
Delhi NCR registered a 50% increase in leasing activity in 2021 on a year-on-year basis. Gurugram accounted for almost 64% share in leasing activity as many firms relocated to better quality buildings in upcoming micro-markets such as Golf Course Extension Road and also centralized locations like Cyber City and MG Road. Recently delivered buildings are witnessing greater traction as occupiers consolidate their portfolios in Grade A buildings with better wellness standards.
A similar trend is seen in other cities where occupiers are exploring next-generation offices to move into as developers and occupiers are committed to future-proof office spaces.
In terms of new supply, the year 2021 saw 35 million sq feet of supply, almost at similar levels of 2020 as developers exercised ‘wait-and-watch’ and aligned new supply in response to market demand.
“Office occupancy is likely to rise in prominent office districts with quality grade A stock. Occupiers have already started preferring next-generation offices. In tune with this, we expect supply in 2022 to be around 35-38 million sq feet, 4% higher than 2021 levels." says Vimal Nadar, senior director and head of research, Colliers India.
Flex spaces expanded at a fast pace this year led by occupiers’ hybrid and decentralised work plans. During the year flex spaces leased about 4.8 million sq feet of space, a 60% rise year-on-year. Flex or shared office space leasing accounted for 15% of the leasing, compared to 9% share last year. Bengaluru accounted for maximum flex space leasing, followed by Hyderabad and Pune.
Operators are leasing space for new centres in suburban and peripheral locations as occupiers explore and adopt the decentralised way of working with hub and spoke-style offices, aligning with business continuity plans.
“Hyderabad leapt to the top three cities led by some large block deals in the December quarter. Bengaluru accounted for the highest share at ~30%, followed by Delhi-NCR & Hyderabad at 19% and 18% respectively," said Arpit Mehrotra, Managing Director, Office Services (South India) at Colliers.
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