Engineering and manufacturing companies see increased office leasing in Q1 2021


The engineering and manufacturing sector witnessed an increase in office leasing in Q1 2021, although it remained second to the IT-BPM sector, says a report by Colliers

Grade A gross office space absorption in the top six Indian cities touched 4.3 million sq ft in Q1 2021, says a report by Colliers. The engineering and manufacturing sector accounted for the second-highest leasing share in the top six Indian cities, after the IT-BPM sector, as manufacturing companies bet on India to set up their global in-house centres. During Q1 2021, the engineering and manufacturing sector’s leasing accounted for about 18% of the total leasing, up from 11% in Q1 2020.

The IT-BPM sector accounted for about 47% of the total leasing, driving demand. The average deal size in IT-BPM was about 37,500 sq ft. Interestingly, EdTech companies accounted for 7% of the total leasing.

Overall, Bengaluru led the leasing activity, with a share of about 47%, followed by Mumbai and Delhi-NCR with a share of 16% and 14%, respectively. “Riding on a strong comeback in Q4 2020, Bengaluru led the office leasing market in Q1 2021. Bengaluru continues to remain the hotspot for occupiers, due to its talent pool and economic business conditions,” said Arpit Mehrotra, managing director, office services (south India), Colliers.

Flexible workspaces accounted for 5% of the leasing in Q1 2021, down from 11% share in Q1 2020. Operators continued to be cautious on expansion and instead, focused on opening centres only with established demand from enterprises. Flexible workspaces saw corporate clients leasing over 11,800 seats with them during the quarter. Bengaluru saw a majority of the flexible workspace leasing, with a deal each in Mumbai and Pune.

 

Overall city leasing share

CityLeasing share
Bengaluru47%
Chennai7%
Delhi NCR14%
Hyderabad9%
Mumbai16%
Pune7%

Source: Colliers

According to Siddhart Goel, senior director and head, research at Colliers India, “2021 started off on a cautious note for the commercial office sector, as occupiers are planning to increase their leasing activities mainly in the second half of the year, basis the success of COVID-19 vaccination. Consequently, even developers have controlled their supply, to ensure that vacancies do not increase beyond comfort levels. Further many occupiers are leasing in flexible workspaces to provide their employees with more space options, as many employees are longing to take a break from continuously working from home but are not keen on undertaking long commutes to their existing office locations.”

See also: Office space demand declines 48% in January-March 2021

Animesh Tripathi, senior director, office services (Pune) at Colliers India added, “Unlike the first wave, when the leasing activity became very slow, we see that occupiers are busy deliberating their real estate strategy this time and continue to show interest in leasing new spaces, while keeping in mind the new workplace strategies and timelines for occupation.”

Sangram Tanwar, managing director, office services (Mumbai) at Colliers India added that “Mumbai will see a spurt in demand as landlords have aligned expectations to the current market situation. Grade A office spaces will be in demand. Industries that are not directly affected by the pandemic are showing healthy recovery from the current level.”

Long-term commitments made for upcoming projects will continue to gain momentum, as corporates get future-ready with modified footprints, concluded Bhupindra Singh, managing director, regional tenant representation (India), Colliers.

 

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