PremiumNEW DELHI : Amidst robust office space absorption seen during 2022, vacancy levels across the top 6 cities dropped by 190 basis points YoY, to 16.6%, indicating strong recovery and stability in commercial office markets, according to Colliers.
“Albeit higher than pre-pandemic levels, vacancy levels have declined every successive quarter of 2022 as leasing momentum remained positive," the report said.
“It is encouraging to see the office market stabilizing this year with vacancies dropping after a gap of two years. 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% share in total leasing, equivalent to flex space. This resonates with the earnings boom seen in the BFSI sector this year", said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
Total leasing during the year was noted at 50.3 mn sq ft, the highest in any year. Occupiers went ahead with their expansion plans after having been in a wait-and-watch mode for two years, said Colliers.
While the year 2022 saw robust demand, there was some weakness in market activity in Q4 2022 as occupiers took a cautious stance amidst global recessionary conditions. As a result, gross absorption in Q4 2022 was about 21% lower than the average seen during Q1-Q3 2022.
“2022 was also a notable year from a supply perspective. The year saw an infusion of 42.9 mn sq ft of supply, 23% 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.
According to the report in 2023 occupiers need to focus on providing agility and creating a dynamic workplace culture as they streamline their workplace strategies for coming years. Developers need to build collaborative and efficient office spaces with a greater focus on sustainability and technology to create stronger portfolios.
Flex space operators leased 7 mn sq ft of space in 2022, highest in any year, accounting for about 14% share in total leasing. Flex operators are increasingly leasing offices in Grade A spaces since last year, led by higher demand from large enterprises.
Bengaluru and Pune remain the popular locations for flex space operators contributing to more than 50% flex space take-up of the year. The year also saw increased office space taken up by BFSI, consulting and engineering firms. Leasing by these three sectors has doubled since last year, and also surpassed pre-pandemic times.
“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. Overall, Bengaluru closed at 16.3 mn sf where gross absorption across the top 6 cities reached 50.3 mn sf, Hyderabad did 6.5 msn sf which is 10% higher than 2021 and Chennai accounted for 4.6 mn in 2022 which is 64% higher than 2021. The growth of southern cities is backed by robust demand from Tech and Flex players," said Arpit Mehrotra, Managing Director, Office Services, South India & Head of Flex (India) Colliers.