Office space leasing up 89% in Sept quarter driven by IT sector: Colliers

With an increasing number of businesses asking employees to return to their physical workplace, the demand for office spaces shot up 89 per cent in the quarter ended September, compared to the previous quarter. After the Coronavirus (Covid-19) pandemic’s second wave in the second quarter, the overall absorption numbers rose as companies planned for a gradual re-entry and closed deals that were on-hold, leveraging tenant favourable market dynamics.

According to a report by real estate investment company Colliers, the top six cities of India witnessed about 10.3 million sq ft of gross office absorption in the July-September period, the highest volume recorded after the Covid-19 pandemic hit last year. Moreover, IT sector driven cities Hyderabad, Bengaluru and Pune accounted for 62% of gross absorption in the second quarter of FY22.

Hit by the second wave of the Covid-19 pandemic, gross leasing of office space had declined by 22 per cent year-on-year across six major cities during January-June this year to 10.1 million sq ft due to lower demand. The gross absorption stood at 13 million square feet in the year-ago period when the pandemic first struck — across India’s six major office markets viz. Delhi-NCR, Mumbai, Chennai, Hyderabad, Bengaluru and Pune.

But that seems to be changing now as large deals made a comeback in the second quarter, according to Ramesh Nair, chief executive officer of Colliers’ India business. “Decision-making by occupiers has become quicker than in 2020. We can expect the optimism to strengthen over the upcoming quarters, provided there is no third wave. Occupiers who were exploring renewal options have begun looking for fresh space,” he said.

After an average performance in Q1FY22, Hyderabad emerged as one of the resilient cities in terms of demand supply dynamics in the second quarter. For the first time, Hyderabad had the maximum share in the leasing volume at 2.5 million sq ft surpassing Bengaluru, as occupiers focused on large block deals, even leasing entire buildings. However, on a year-to-date basis, Bengaluru continues to be the market leader in terms of office space leasing.

Leasing share by flexible workspace operators also rose in Q2FY2021 owing to high demand from occupiers looking for managed spaces and short-term leases to tide over uncertain times. Share of flexible workspaces in leasing increased to 26% in Q2FY2021. Leading flexible workspace operators focussed on signing large block deals exceeding 100,000 sq ft in almost all major cities seeing increased interest from corporates for managed spaces. Pune accounted for the highest share in flexible workspace, followed by Hyderabad.