With the number of COVID-19 cases declining, demand for offices accelerated with office space leasing registering a year-on-year jump of 25 per cent at 10.8 million square feet (MSF) during January-March 2022. has started to return. According to a report by real estate consultancy firm Knight Frank, Bengaluru remained the leading market with total leaseholding of 3.5 msf, followed by NCR with 2.3 msf.
It said fares increased either steady or sequentially during the January-March 2022 quarter. “Even on a year-on-year basis, rents have remained stable or increased in five out of eight markets. Bengaluru saw the highest growth in Q1 2022 with a year-on-year increase in rental values of 4 per cent, it said.
State-wise, Bengaluru retained its top position by leasing out 3.5 msf of office space which was a growth of 5 per cent year-on-year. NCR registered a growth of 37 per cent to become the second best performing leasing market with a gross leasing volume of 2.3 msf. Hyderabad registered an impressive growth of 72 per cent with total leasing of 1.6 msf annually.
Chennai registered a year-on-year growth of 124 per cent with leasing of 1 msf recorded in Q1 2022. “Ahmedabad registered a growth of 165 per cent in gross leasing in Q1 2022, albeit on a lower basis. Mumbai was the only market that saw a 24 per cent decline in leasing activities, with 900,000 sq ft (sq ft) leasing out in the first quarter of 2022.
The report also noted that inquiries for office space have increased significantly over the past few quarters. This has increased the supply of office space. “11.9 msf of new office space was added in the top eight cities in the first quarter of 2022, registering a growth of 13 percent over the same quarter last year.”
It said Pune led all markets with a growth of 107 per cent with new supply additions of 3.6 msf in the first quarter of 2022, while Bengaluru recorded new completions of 2.5 msf (25 per cent yoy) for the quarter. The second highest was the increase in volume. ,
Co-working and managed office space saw an increase in the share of office space absorption, accounting for 21 per cent of the total leasing volume in Q1 2022, compared to 11 per cent in Q1 2021, the report said. In Q1 of 2022, 2.3 msf of office space was 0.9 msf compared to Q1 2021 registering a year-on-year growth of 151 percent.”
The information technology segment saw a decline in its share of space take-up in the first quarter of 2021 from about 27 per cent of total leasing versus 32 per cent in the first quarter of 2021. The ‘back to office’ transition of the IT sector was disrupted. The Omicron variant by and large caused some IT corporates to postpone their leasing decisions, the report said.
It said rental prices also continued to improve in five of the eight markets, given the rise or stagnation in rental prices compared to a year ago.