The report noted that despite being higher than pre-pandemic levels, vacancy levels declined in every quarter of 2022 as leasing momentum remained positive.
NEW DELHI : Amid strong office space absorption during 2022, vacancy levels across top 6 cities declined by 190 basis points to 16.6%, indicating strong recovery and stability in commercial office markets, according to Colliers .
"Despite exceeding pre-pandemic levels, vacancy levels declined in each quarter of 2022 as leasing momentum remains positive," the report said.
“It is encouraging to see the office market stabilizing this year with vacancies increasing after a gap of two years. Interestingly, BFSI companies have expanded rapidly this year, with Indian banks as well as global financial institutions leasing large office space. Leasing by BFSI has almost doubled since last year, with flex space equivalent, accounting for a 14% share in total leasing. This resonates with the uptick in earnings in the BFSI sector this year", said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
Total leasing during the year was recorded at 50.3 million sq ft, the highest in any year. Colliers said Occupiers went ahead with its expansion plans after being in wait-and-watch mode for two years.
While the year 2022 saw strong demand, there was some weakness in market activity in Q4 2022 as occupiers turned cautious amid global recessionary conditions. As a result, gross absorption in Q4 2022 was approximately 21% lower than the average observed during Q1-Q3 2022.
“2022 was also a remarkable year from a supply perspective. The year saw a supply of 42.9 million sq ft, up 23% over the previous year as developers focused on project completion. Nearly half of the new supply was seen in Hyderabad and Bengaluru. In 2023, developers are likely to plan their ongoing and upcoming projects based on demand trends to maintain overall market stability in terms of vacancies and rents."
Businesses need to focus on delivering agility and creating a dynamic workplace culture as they streamline their workplace strategies for the coming years, according to the 2023 report. Developers need to create collaborative and efficient office spaces with greater focus on sustainability and technology to build a strong portfolio.
Flex space operators leased 7 million square feet of space in 2022, the most in any year, accounting for nearly 14% of total leasing. Due to high demand from large enterprises, flex operators have been leasing out offices in Grade A spaces since last year.
Bengaluru and Pune continue to be popular locations for flex space operators, contributing to over 50% of the flex space take-up for the year. The year also saw an increase in office space by BFSI, consulting and engineering firms. Leasing by these three sectors has doubled from last year, and has also surpassed pre-pandemic times.
“Markets in the South – 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 with 3.4 mn in Q4 2022. Overall, Bengaluru closed at 16.3 million sf where as the top 6 cities saw gross absorption reach 50.3 million sf, Hyderabad did 6.5 msn sf which is 10% higher than 2021 and Chennai accounted for 4.6 million in 2022 64% higher than in 2021. Southern cities are supported by strong demand from tech and flex players," said Arpit Mehrotra, Managing Director, Office Services, South India and Head of Flex (India) Colliers.
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