The office sector in India continued to witness a robust recovery in Q1 2022, as leasing activity grew by 97% Y-o-Y to touch 11.4 million sq. ft. Bangalore, Chennai and Delhi-NCR dominated absorption during the quarter, accounting for almost two-thirds of the transaction activity, according to CBRE’s latest office report ‘CBRE India Office Figures Q1 2022’.
Technology corporates drove leasing with a share of about 34%, followed by BFSI firms (17%), flexible space operators (13%), engineering & manufacturing (12%) and research, consulting & analytics (11%) firms.
The report further highlighted that office space take-up was driven by small (less than 10,000 sq. ft) to medium-sized (10,000-50,000 sq. ft.) transactions with a share of around 84%. Pune and Chennai, followed by Delhi-NCR and Bangalore, dominated large-sized deal closures.
Supply witnessed in Q1 2022 was around 9.4 million sq. ft. – a slight dip of around 11% Y-o-Y and 41% Q-o-Q. Bangalore, Hyderabad and Chennai dominated development completions, accounting for a cumulative share of about 70%. Supply was driven by non-SEZ developments with a share of around 83%.
Commenting on the same, Anshuman Magazine, Chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE, said, “With the government’s evolving COVID-19 protocols and the recovery in office leasing in 2021, we expect the positive momentum to further strengthen in 2022. We continue to witness a pickup in long-term decision-making by occupiers, aided by ‘return-to-work’ strategies, thereby accelerating project completions.”
Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “As economic recovery continues to gain momentum, we expect the increase in leasing activity to bring a new focus on large-sized and high-quality buildings by developers to differentiate their assets and attract occupiers. We also expect large institutional players to continue with greenfield investments via JVs / partnerships / platforms or brownfield investments via REITs, which in turn would also boost the upcoming supply in the coming years.”
Supply:
* Supply would continue to be dominated by Bangalore, Hyderabad and Delhi-NCR, which would drive close to 70% of the completions in 2022.
* SEZ supply would mostly be led by Hyderabad and Delhi-NCR, while non-SEZ supply would be led by Bangalore, followed by Delhi-NCR and Hyderabad.
Office space take-up:
* The share of large-sized deals remained similar to previous quarter at about 7%, while the share of medium- to large-sized (more than 10,000 sq. ft.) deals witnessed a rise.
* As in 2021, Bangalore, Hyderabad and Delhi-NCR are expected to continue to drive transaction activity in 2022.
Key trends:
* Renewals, renegotiations, and addition of flexibility options are likely to be the focus of occupiers in the short term.
* CBRE expects to see clearer evidence emerging in any corporates’ intended shift towards hybrid working policies, with several occupiers planning to implement policies allowing office-based working with the option of working remotely.
* With an increased focus on wellness, user experience and sustainability, occupiers are expected to demand more sophisticated and tech-enhanced real estate offerings.
* Environmental & sustainability issues, such as carbon emissions, the use of sustainable materials, energy efficiency and wellness enhancements are likely to become ever more important to occupiers and owners of office buildings.