Post the pandemic, it was widely anticipated that co-working would soon be issued a death certificate. However, like many others, this prediction was baseless – the ‘new normal’ has caused co-working spaces to emerge as one of the best options for adopting a hybrid model at offices.
Latest ANAROCK Research reveals that out of the total net absorption of 34.1 mn sq ft across the top 7 cities in FY 2021-22, co-working comprised a 13% share (approx. 4.43 Mn sq. ft.). In FY 2020-21, its share was just 5% of a net absorption of 21.32 mn sq ft – an 8% growth in its total share. This is the highest growth rate among all office segments.
At about 4%, the manufacturing / industrial sectors registered the second highest YoY growth in net office absorption in FY22. The share of the IT/ITeS and ecommerce sectors declined by 8% and 6%, respectively, as compared to FY21.
Anuj Puri, Chairman – ANAROCK Group, says, “The hybrid work model emerged as a formidable new force on the Indian office real estate market during the pandemic. There was a gradual but significant transition to flexible spaces which offer businesses and employees the agility to continue operations seamlessly. Co-working spaces have become the most preferred option to adopt the hybrid work model, compared to the other options of changing office layouts or the hub-and-spoke model.”
Large deals (>0.1 Mn sq. ft.) accounted for nearly 50% of the overall office transaction activity across the top 7 cities in FY22 compared to 47% in FY21. Mid-sized occupiers also witnessed a marginal rise of 1% of total office leases in FY22, and smaller deals saw an annual dip of 4%.
“Mid and large deals were prominent in the current financial year as occupiers are optimizing their portfolios,” says Puri. “The new realities include bringing employees back to the workspace, increased assessment of new leases, and an improving hiring scenario.”
Completions – The top 7 cities witnessed robust new office supply in FY22, aggregating to 51.2 mn sq. ft. – thus rising by 27% against FY21. The southern cities of Bengaluru, Hyderabad and Chennai dominated new completions with a total of 58% share (approx. 29.85 Mn sq. ft.).
Rentals – The avg. office rentals stood at INR 76/sf/Mo across the top 7 cities. MMR continued to be most expensive office market with INR 126/sf/Mo rentals, followed by Bengaluru and NCR at INR 78/sf/Mo each.
Vacancy – Given the high new completions, the avg. vacancy levels across the top 7 cities rose by 1% – from 15% in FY21 to 16% in FY22.
- At 28.5%, NCR has the highest office space vacancy amongst the top 7 cities, followed by Kolkata and MMR at 23.5% and 15.75% respectively.
- Pune is the only city where office space vacancy rate is hovering in single digit at 8.5%.