Flex, hybrid and green to be key underlying themes in India’s office market in 2023: Colliers

• In 2023, amidst ongoing layoffs by tech companies, the sector’s demand for flex spaces is set to rise as they offer flexible lease terms.
  
• 63% of the occupiers in India are currently embracing hybrid mode and are likely to continue with hybrid working arrangements.
  
• Listed developers target to increase their green portfolio by about 25% by 2025-2030.
  

Flex spaces, hybrid working spaces and greening real estate are likely to be the underlying themes for the office sector this year, according to the ‘Real Estate Outlook for 2023’ report by real estate consultancy Colliers.

The year 2023 has started on a cautionary note with pressures from a looming global recession and slowdown in certain sectors, the report said. However, the real estate sector performed well during 2022, despite the economic concerns, witnessing higher traction.

"The real estate sector saw strong recovery gains and impressive growth in 2022, signaling the significance of office spaces in a post Covid-19 world. As we look at 2023, the global economy is seeing signs of recession which could lead to a relative slowdown. However, the APAC (Asia-Pacific) region appears less volatile, with several pockets of opportunity on the horizon. We foresee some stability in the market by mid-year in the office markets. Hybrid working, flexibility and greening real estate will be the key buzz words in the sector,” said Ramesh Nair, chief executive officer, India & managing director, market development, Asia, Colliers.

Higher demand for flex space by tech companies

At the close of 2022, office leasing in India crossed 50 million sq ft, of which 14% corresponded to leasing by flex players – the highest in any year. In 2023, amidst a looming global recession and ongoing layoffs by tech companies, they are likely to increase their demand for flex spaces as they offer flexible lease terms and aid cost control.

Hybrid models to evolve

While 2022 was the year when the hybrid working model picked up pace, the year 2023 would see occupiers creating policies to further define hybrid work. As per a survey done by Colliers on hybrid working in September 2022, 63% of the occupiers in India are currently embracing hybrid mode and are likely to continue with hybrid working arrangements with employees coming to the office for 2-3 days a week.

More green properties to enter the market

According to Colliers, the stock of green-certified buildings has witnessed a five-fold increase in 2022 compared to 2010. As a part of their short-term goals on ESG (environmental, social and governance) criteria, listed developers target to increase their green portfolio by about 25% by 2025-2030 and increase the use of renewable sources of energy.

The report states that about 60 million sq ft of additional green Grade A stock has received pre-certifications or are under discussion for green certification, and are likely to come up in the office markets of Hyderabad, Pune and Delhi NCR. Moreover, green financing is likely to drive major investment decisions as domestic and offshore investors seek quality Grade A projects that are ESG compliant.