Office rentals in 2021 were 7% above the 2016-18 average: Colliers
The overall absorption of office space is picking up and increasing better than expected. At the city level, all cities except Bengaluru and Delhi-NCR exceeded the 2016-2018 annual average absorption, according to Colliers. Hyderabad had recorded strong recovery gains in 2020 and also maintained its streak in 2021. It was followed by Chennai and Mumbai which gained significant momentum during the year. This is attributable to a strong fourth quarter, building on the momentum seen in the previous quarter of the year.
Overall gross office absorption in the six major cities was around 33 million square feet, up 10% from 2020, Colliers said in a report. Pan-Indian absorption during the year exceeded annual gross absorption by 7% over the period 2016-2018, signaling a strong recovery in occupant confidence. Occupancy levels increased in the leading office micro-markets in the top 3 cities at the end of 2021 compared to the third quarter of 2021, due to a gradual recovery in demand and a decrease in demand. occupant exits.
For example, submarkets such as MG Road from NCR, Mumbai BKC and SBD and Whitefield from Bengaluru saw their occupancy rates increase after a gap of at least 6 quarters. At the same time, the total number of job vacancies across India stood at 18.5%, an increase of just 40 basis points from the third quarter of 2021.
The year 2021 is coming out better than expected
“The year 2021 has turned out to be better than expected, given the devastating wave we have seen during the year. Demand continues to be dominated by technology companies. However, we are seeing a greater appetite for office space from start-ups. The year 2022 will be even better, even if concerns about Covid-19 persist. Gross absorption in 2022 will be around 15-20% higher as occupant confidence returns to the market, ”Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
In terms of new offering, the year 2021 saw 35 million square feet of supply, almost at the same level as 2020, as developers “wait and watch” and align the new offering in response to market demand.
“Office occupancy rates are likely to increase in major office districts with quality A stock. Occupants have already started to prefer next-generation offices. In keeping with this, we expect supply in 2022 to be around 35-38 million square feet, or 4% more than in 2021. ”says Vimal Nadar, Senior Director and Chief Research Officer , Necklaces India.
Leasing of startups up 56% in the top 3 cities
In the top three cities, start-ups leased around 2.2 million square feet of space in 2021, a 56% increase from 2020. The biggest surge was seen in Delhi-NCR, where start-ups have largely rented office space in Gurgaon. It comes at a time when India has seen 42 start-ups become unicorns – the highest on record.
Flexible spaces extend across peripheral and suburban locations
Flexible spaces have grown at a rapid pace this year thanks to hybrid and decentralized occupant countertops. During the year, Flexible Spaces leased approximately 4.8 million square feet of space, a 60% increase year-over-year. Rental of flexible spaces accounted for 15% of rentals, up from 9% last year. Bengaluru represented the maximum flexible space rental, followed by Hyderabad and Pune.
Operators rent space for new centers in suburban and peripheral areas as occupants explore and embrace the decentralized way of working with hub and spoke offices, aligning with business continuity plans.
Delhi-NCR rental up 50% driven by demand for next-gen office space
Delhi NCR recorded a 50% increase in rental activity in 2021 on an annual basis. Gurugram accounted for almost 64% of rental business as many companies moved to better buildings in upcoming micro-markets such as Golf Course Extension Road and also centralized locations like Cyber City and MG Road . Newly delivered buildings are experiencing greater traction as occupants consolidate their portfolios in Category A buildings with better welfare standards. A similar trend is seen in other cities where occupants are exploring next-gen office space to settle down as developers and occupants pledge to make office spaces that stand the test of time.
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Posted on: Monday January 10th, 2022 09:43 IST