India’s office sector is likely to see about 35-38mn sq ft of gross leasing in 2023, as per a report made by Colliers. In such a scenario, it is assumed that Q2 2022 will slow down the economic blow and will have a negligent impact on occupiers’ confidence. Consequently, larger occupiers will complete leasing decisions that were put on hold momentarily, which will result in a big boost in space take-up. Read SURFACES REPORTER (SR)'s complete report on this.
Conversely, in a pessimistic scenario, the economic challenges would be prolonged and slow down demand recovery. It is anticipated that 2023 leasing will be around 30-33 million square feet at a gross level.
The report reveals that despite the international chaos, and the perceptible uncertainty in the office market in 2032 and other external factors, it may easily bounce back. The second half of the year is most likely to see an increase in leasing activity, led by global capability centres, BFSI companies and start-ups with sound business models.
Hybrid working is optimizing office space utilization
Led by various employee-centric and operational benefits, occupiers are embracing hybrid working model. 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, optimizing office space, and making them more amenable to collaboration. Occupiers are also looking at splitting office spaces across business hubs, as employees prefer working from locations closer to homes.
Amidst fast-shifting market dynamics, flex spaces to remain upbeat
Offices have become resilient and are seeking ways to seamlessly weave hybrid modes of working through flex spaces – which are a ‘one-stop solution’ for occupiers. During 2022, flex operators in India leased 7 mn sq ft of Grade A office space rising more than 3-folds compared to the pandemic levels.
Even amidst the ongoing flux in the tech 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.
The performance of the office sector during 2023
During 2023, a relative slowdown is expected in overall traction especially from the tech sector due to the ongoing layoffs triggered by slower external demand. However, leasing by flex, engineering and BFSI companies are expected to remain resilient. 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.
The report made in partnership with FICCI shows how hybrid working is possible to optimize space utilization 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.
Talking about why most occupiers in near future will most likely switch gears towards the adoption of a hybrid model, Vimal Nadar, Senior Director and Head of Research, Colliers India, elaborates, “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,” he concludes.
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