India’s office sector may see about 35-38 million square foot (msf) of gross leasing in 2023 in an optimistic scenario, says the latest report by property advisory giant Colliers India.
“In such a case, the economic headwinds are expected to ease out by Q2 2022, and not cause a significant dent to overall occupiers’ confidence. This will translate into a significant increase in space take-up as larger occupiers will close leasing decisions that were put on hold temporarily,” says the report.
In a pessimistic scenario, on the other hand, the impact of economic headwinds would be prolonged, delaying a recovery in demand. “In this scenario, we expect 2023 leasing to be about 30-33 msf at a gross level,” it said.
While the office market in 2023 looks uncertain currently, it might bounce back with relative ease despite the global headwinds and other externalities. Leasing activity is likely to pick up in the second half of the year, led by global capability centers, BFSI companies and start-ups with sound business models, says the report.
The report by Colliers, in collaboration with industry body FICCI, highlights how hybrid working is likely to optimise space utilisation and will continue to influence physical work infrastructure and how we work. Further, flex spaces will continue to be a major focal point for landlords and occupiers.
“Growth in traditional and flex spaces has been robust in 2022 as occupiers were more upbeat about leasing space and expanding their footprint. In 2023, despite the office market being riddled with uncertainty, the office sector is poised for growth, provided the economic environment remains bright. We do not expect the leasing numbers to fall below the peak pandemic levels of leasing even in a pessimistic scenario. The key fundamentals of the office market will follow the trajectory of demand and supply to maintain a balance in the market,” said Peush Jain, managing director-office services, Colliers India.
Hybrid working optimising space utilisation
Led by various employee-centric and operational benefits, occupiers are embracing hybrid working models. An occupier survey conducted by Colliers on hybrid working in September 2022 showed 63% of the occupiers were embracing hybrid working models. Post pandemic, the nature of office space take up is changing as occupiers are focusing on de-densification of spaces. Occupiers are transitioning towards hybrid work, optimising office space, and making them more amenable for collaboration. Occupiers are also looking at splitting office spaces across business hubs, as employees prefer working from locations closer to homes.
Flex spaces to remain upbeat
During 2022, flex operators in India, leased 7 msf of Grade-A office space, rising more than 3-folds compared to the pandemic levels. However, even amid the ongoing flux in the technology sector, occupiers are likely to take up flex spaces for leasing led by the flexibility in leasing terms and short-lease tenure offered by flex players, easing up their capital expenditure.
How will the office sector perform during 2023?
During 2023, a relative slowdown is expected in overall traction especially from the technology sector due to the ongoing layoffs triggered by slower external demand. However, leasing by flex, engineering and BFSI companies are expected to remain resilient, says the report.
“Time will tell whether the office market will surpass the recessionary concerns and set its ground in the latter part of 2023 or will the economic headwinds have a prolonged impact. However, the market is sturdy enough to dodge back as it did during the pandemic times,” it says.
“Hybrid working has been a game-changer in the future of work. To accommodate employees’ changing needs, occupiers are likely to switch gears towards adoption of hybrid models. This would benefit companies through optimal space utilization. Occupiers are also likely to split their large offices into satellite offices, to bring offices closer to employees’ homes. As a byproduct, the demand for flex spaces is likely to see an uptick. In the next few years, hybrid working is likely to pivot key office fundamentals, and will be especially critical for the growth of flex spaces,” said Vimal Nadar, senior director and head of research, Colliers India.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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