Office leasing up after Covid waves, IT sector leads in occupancy: Reports

Bengaluru leads in lease transactions and it is followed by Delhi-NCR, Mumbai, and Chennai

Office leasing in the country increased in the first half of this year as coronavirus cases waned and corporate employees started stepping out of their homes, said three reports on Tuesday.

The return-to-office is across sectors and led by Information Technology (IT), banking financial services and insurance (BFSI), and consulting industries.

Knight Frank’s 'India Real Estate H1 2022' report shows a 107 per cent year-on-year (YoY) rise in transactions in office market for the first half of 2022 at 25.3 million square feet (msf). The second quarter of April-June alone posted a 35 per cent growth, with 14.6 msf of volumes transacted.

"Corporate India remained committed to return to office and resumed in earnest after a short hiatus during the Omicron impacted period of early 2022. The leadership of most corporates returned to the office and actively urged their workforce to do the same. This has steadily increased physical occupancy levels, and combined with a revival in hiring, it is driving transaction activity across markets," said Knight Frank.

JLL India found that gross leasing volume (GLV) for April-June (Q2 2022) stood at 14.3 million sq. ft. (msf). That number is up by 36 per cent quarter-on-quarter (Q-o-Q) and second only to Q4 2021 in the past nine quarters. On a half-yearly comparison, GLV at 24.8 msf during H1 2022 was up nearly two-fold YoY and over 80 per cent of the H1 2019 numbers, according to JLL’s Office Market Update-Q2, 2022.

GLV refers to all lease transactions in a period, including confirmed pre-commitments, but excluding term renewals and deals in discussion stage.

Bengaluru was top of the charts by accounting for 34 per cent of the quarterly GLV. It is followed by Delhi NCR (30 per cent), Mumbai (12 per cent), and Chennai (11 per cent), according to GLV.

Knight Frank said IT sector’s direct leasing was subdued and it opted for co-working/managed office during H1 2022. The sector’s share in total transactions increased to 17 per cent in H1 2022 from 10 per cent in H1 2021 with 47,500 seats being taken up in managed office premises in 2021, posting a 49 per cent YoY growth.

JLL India said tech companies are the top users of India’s office space, increasing their share to 33 per cent from 25 per cent Q-o-Q. The manufacturing/industrial sector continues to show impressive gains with a 13 per cent share of market activity.

CBRE South Asia, a real estate consulting firm, found that office leasing recorded the highest-ever quarterly growth of 61 per cent at 18.2 msf in Q2 of 2022 compared to Q1 of 2022.

Samantak Das, JLL’s chief economist, and head research and REIS, India, estimated in the next 12 months, 55-60 million sq. ft of premium office space is likely to be completed across the top seven cities. Of this, institutional and top developers (based on city-level Grade A office space ownership and well-known national/regional brands) account for a 72 per cent share.

"The current pre-commitment rate for the total 12-month forecast supply now stands at 17 per cent. However, when we look at the superior grade supply (institutional players only), the pre-commitment rate rises to 31 per cent. This clearly signals the flight to quality assets by major occupiers and offices remaining central to their workplace strategies," said Das.