Flex leasing to reach 7 million sq ft by end of 2022 on rising demand for office space, says Colliers

• The demand for office space is likely to be up by 52% in 2022 as compared to 2021.
  
• In fact, the demand for office space in Bengaluru, Delhi-NCR and Chennai in 2022 has already surpassed 2019 levels.
  
• As per the report, flex operators are likely to lease 7 million square feet by the end of 2022, touching the highest ever in the country, after 2019.

With most companies adopting work-from-home during the Covid-19 pandemic, the demand for commercial office spaces slowed down in the last two years. However, with more and more offices adopting a hybrid work mode and asking employees to return to office the demand for office spaces went up in 2022. It is now likely to touch 50 million sq.ft., according to a report by Colliers, a professional services and investment management company.

This demand is also likely to be up by 52% this year as compared to the previous year. “Occupiers have been optimistic about their future workplace needs, after a gap of two years, and were snapping up office space across the top Indian cities,” the report says.

Flex space sees an upward trend

The report projects that flex operators are likely to lease 7 million sq. feet by the end of 2022, touching the highest ever in the country, after 2019.

“This represents a 2-fold increase from 2021 as flex space has seen immense demand from medium and large enterprises this year. Occupiers approaching their lease expiry are exploring flex spaces as their relocation option, for the flexibility it offers them,” the report said.

According to Vimal Nadar, senior director and head of research, Colliers India, new supply of the flex space is expected to increase by about 25%-30% on a year-on-year (YoY) basis during 2022, at about 44 million sq.ft. However, in 2023, developers are likely to step ahead with caution.

“Developers are likely to align new supply with the demand momentum. This will ensure the market equilibrium is not disturbed and vacancy levels remain range bound,” Nadar said.

Demand for office spaces already surpassing 2019 levels

As per the report, Bengaluru will account for at least 33% of the gross absorption of the office spaces. This is likely to be followed by Delhi-NCR and Hyderabad among other cities in India.

“The year 2022 is likely to be a landmark year in commercial office real estate. Collaborating, brainstorming and creating a dynamic culture are the three pillars of any workplace post-pandemic,” said Ramesh Nair, CEO, India and managing director, Market Development, Asia, Colliers.

Nair further said that slow decision-making could result in leasing activity of about 35-38 million sq. feet next year. In 2023, Bengaluru followed by Hyderabad are expected to see most of the new supply across the top six cities.

The demand for office spaces in 2022 has already surpassed 2019 levels in Bengaluru, Delhi-NCR and Chennai. Pune is also expected to witness a similar traction by the end of this year, according to the report.

“We see a slight dent in enquiries and demand in the near term amidst global economic headwinds. Provided the demand remains stable and consistent in the first half of 2023, rentals are likely to pick up from the second half of the year,” Nair added.

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