With the number of COVID-19 cases coming down, demand for offices has started making a swift return with office space leasing registering a 25 per cent year-on-year jump during January-March 2022 to 10.8 million square feet (msf). Bengaluru remained the foremost market with total leasing of 3.5 msf, followed by NCR with 2.3 msf, according to a report by real estate consultancy firm Knight Frank.
It said rents have stabilised or grown in sequential terms during the January-March 2022 quarter. “Even in year-on-year terms, rents have stayed stable or grown in five of the eight markets. Bengaluru saw the most growth with a YoY rise in rental values of 4 per cent in Q1 2022, it said.
State-wise, Bengaluru maintained its top position leasing 3.5 msf of office space which was a rise of 5 per cent year-on-year. The NCR recorded a rise of 37 per cent y-o-y to become the second-best performing leasing market with the gross leasing volume of 2.3 msf. Hyderabad recorded an impressive 72 per cent y-o-y growth with total leasing of 1.6 msf.
Chennai recorded a rise of 124 per cent year-on-year with the leasing of 1 msf recorded in Q1 2022. “Ahmedabad also recorded a substantial 165 per cent y-o-y rise in gross leasing in Q1 2022, albeit on a low base. Mumbai was the only market that saw a decline of 24 per cent in leasing activities with 900,000 square feet (sq ft) being leased in the first quarter of 2022.”
The report also said that the enquiries for office spaces have increased significantly over the past few quarters. This has led to a rise in office space supply. “The first quarter of 2022 saw the addition of 11.9 msf of new office space across top-eight cities, registering a rise of 13 per cent y-o-y over the same quarter last year.”
It said Pune led all markets with new supply additions of 3.6 msf in Q1 2022 a rise of 107 per cent y-o-y, while Bengaluru recorded new completions of 2.5 msf (25 per cent y-o-y), which was the second-highest volume addition for the quarter.
The report said co-working and managed office spaces saw a rise in the share of office space absorption making up 21 per cent of total leasing volume in Q1 2022 as against 11 per cent in Q1 2021. “In absolute terms, managed office spaces took up 2.3 msf of office space in Q1 2022 against 0.9msfin Q1 2021 recording a rise of 151 per cent year-on-year.”
The information technology segment saw a decline in its share of space take-up in the first quarter of 2021, making up about 27 per cent of total leasing versus 32 per cent in Q1 2021. The IT sector’s ‘back to office’ transition was hampered by the Omicron variant and caused some IT corporates to postpone their leasing decisions, the report said.
It said rental values also continued to recover with five of the eight markets seeing an increase or stability in rental values compared to a year ago.
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