Leasing by flex space operators hits a new high of 7 million sq.ft in 2022: Colliers

• Bengaluru and Pune remain the popular locations for flex space operators, contributing to more than 50% flex space take-up of 2022.
  
• In 2022, leasing by banking, financial services and insurance (BFSI), consulting and engineering sectors doubled from 2021.
  
• The report further revealed that increased office space absorption in 2022, led to the vacancy levels across top six Indian cities drop to 16.6%.
  

Leasing of flex spaces was reportedly the highest in 2022 as compared to previous years. According to a report by Colliers, flex space operators leased 7 million sq.ft of space, accounting for 14% share in total leasing.

“Flex operators are increasingly leasing offices in Grade A spaces since last year, led by higher demand from large enterprises,” said the report. Bengaluru and Pune remain the popular locations for flex space operators contributing to more than 50% flex space take-up of the year.

“The south markets – Bengaluru, Chennai, and Hyderabad – witnessed strong leasing during YTD 2022. Bengaluru has been the undisputed leader of office leasing in India for a while now and has maintained the streak in 2022 with 3.4 million in Q4 2022,” said Arpit Mehrotra, managing director, office services, South India and head of flex, India, Colliers.

After Begaluru, flex space leasing in Pune touched a new high during the year at 1.8 million sq ft, grabbing the second spot in pan-India flex leasing. “2022 was a remarkable year for Pune’s commercial real estate with gross absorption witnessing significant recovery. As occupiers make a more systematic return to the office and eye more flexible lease options next year, it will be interesting to see how the flex market in Pune shapes up,” said Animesh Tripathi, managing director, Pune, Colliers

As per the report, there was also an increase in office spaces being taken by banking, financial services and insurance (BFSI), consulting and engineering sector firms in 2022, and the leasing by these three sectors doubled since 2021, surpassing even pre-pandemic times.

“BFSI companies have expanded rapidly this year, with Indian banks as well as global financial institutions leasing large office spaces,” said the report.

Leasing by BFSI almost doubled since last year, accounting for a 14% share in total leasing, equivalent to flex space. The financial capital of India, Mumbai witnessed the highest BFSI leasing at 40% share, as financial institutions made their comeback to offices.

“Interestingly, BFSI companies have expanded rapidly this year, with Indian banks as well as global financial institutions leasing large office spaces. This resonates with the earnings boom seen in the BFSI sector this year,” said Ramesh Nair, CEO, India and managing director, market development, Asia, Colliers.

Office space vacancy dropped in 2022

As per the report, increased office space absorption in 2022 led to the vacancy levels across top six Indian cities (Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune) drop from 18.5% in 2021 to 16.6% in 2022. This indicated a strong recovery and stability in commercial office space markets.

“Albeit higher than pre-pandemic levels, vacancy levels have declined every successive quarter of 2022 as leasing momentum remained positive,” the report said.

Total leasing of office spaces during the year 2022 was noted as 50.3 million sq.ft — which was the highest in any year.

Delhi NCR recorded 72% year-on-year change in grade A gross absorption rate, followed by Bengaluru (67%) and Chennai (64%). Gross absorption does not include lease renewals, pre-commitments and deals where only a Letter of Intent has been signed.

“Delhi-NCR recorded a growth of over 72% from the previous year. The pent-up demand of 2020 and 2021 led to a significant rise in the gross absorption for 2022. Although Q4 has seen a slight dip, it can be linked to the slowdown which is gradually creeping especially in the technology sector,” said Bhupindra Singh, managing director, North, Colliers.

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