Market Trends of India Commercial Real Estate Industry
Office space demand to propel the market in India
Investor confidence in a swift economic recovery is being boosted by the rapid pace of the vaccine campaign, which is backed by a decrease in COVID-19 cases. With the gradual unlocking of economic activities and employers' shift in office premises for increased demand for co-working space, developers are optimistic about a healthy rebound in office leasing activity.
Bengaluru recorded the highest influx of new office supply, accounting for 28% of the total new office supply across seven major cities of India. Hyderabad contributed 23% of the total share and was second. Chennai recorded a rise of 124 per cent YoY with leasing of one msf recorded in 2022. Ahmedabad also recorded a substantial 165 per cent YoY rise in gross leasing in 2022, albeit on a low base.
According to research published by real estate consultant Colliers India, office space supply increased 49% to 32.8 million square feet during January-September this year across six cities due to the completion of numerous commercial developments to fulfill the increasing demand. According to Colliers India, the same amount was 22 million square feet in the same period across six cities Bengaluru, Chennai, Delhi-NCR, Hyderabad, Pune, and Mumbai.
The new office supply, which was 8.1 million square feet from January through September, decreased by 1% from the year before. From 2.1 million square feet in fresh supply, India's financial hub saw a 16% decrease to 1.8 million square feet. Chennai experienced the most significant increase in the number of new offices, which went from 0.9 million square feet to 4.2 million square feet. Delhi-NCR had a 133% increase in floor space from 2.7 million square feet to 6.3 million square feet, while a 56% increase in new office space supply increased from 5.1 million square feet to 7.9 million square feet.
The demand for flexible and co-working spaces is on the rise
According to industry experts, as of March, Bengaluru recorded the most operational flex space centers among all tier-1 cities in India. Mumbai followed with 343 flex space centers. Around the same time, Bengaluru recorded around 25 thousand leased flex seats, the highest among all tier-1 cities in India. Pune followed with more than 16 thousand leased flex seats.
In the financial year, 147 flex seat transactions were concluded in the Delhi NCR region, the highest among other tier-1 cities of India. Mumbai followed with 133 flex seat transactions during the same year. The information technology and the new tech sector contributed 30% to the flex seat take-up, the highest among all other sectors in India. Start-ups also opted for flex and co-working spaces and took 18% of the total share. The demand for flexible and co-working spaces is on the rise in the Indian office real estate market.
Once dominated by information technology, office spaces are being increasingly leased by other sectors such as BFSI (banking, financial services, and insurance), engineering, manufacturing, e-commerce, and co-working sectors. COVID-19-induced changes include the introduction of a hybrid work model in workplaces across the country. Smaller homes and larger family sizes propelled the growth of flex and co-working spaces in the country. IT-ITes, BFSI, e-commerce, and professional services employees emerged as the key occupiers of these flexible working spaces. Start-ups and small and medium enterprises (SMEs) focusing on tapping the talent of the mobile workforce also resulted in the demand for flex seats.
