The office sector in India saw a strong recovery in demand in 2022, despite being marred by some uncertainty arising out of the global economic disruptions. The sector recorded gross office leasing of 51.6 million square feet (mn sq ft) of space in 2022, a rise of 36 percent year-on-year (YoY).
Going forward, demand for commercial space could continue to grow, as 60-65 percent of all employees are estimated to return to office during the year. This is thanks to an increasing number of companies pursuing a return-to-office policy.
“The big trend that we are likely to see in 2023 is normalisation. We will see normalisation of return to offices as well. We will see higher percentage of employees returning to work (office) and that may be as 60-65 percent of the pre-pandemic levels,” Viral Desai, Senior Executive Director, Knight Frank India, told reporters at the launch of Knight Frank India’s 18th edition of its flagship half-yearly report – India Real Estate: 2022 – which presents an analysis of the residential and office market performance across eight major cities for the July-December 2022 (H2 2022) period.
He also said that India-facing businesses are likely to take up more commercial space in 2023 rather than global businesses.
“The increase in the numbers of those returning to office is pretty much going to be across all sectors. In most cities, barring a few IT and ITeS offices, employees of BFSI, pharma, and manufacturing all have returned to work. Some IT firms are still operating in the hybrid model.
Slowly, they too will move to the work-from-office mode. Having said that, we continue to keep a watch on the spread of COVID-19 and hope it stays under control,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
New office space completions also grew by 28 percent YoY to 49.4 mn sq ft in 2022, the report said.
In terms of the demand for office space, Bengaluru-led with 14.5 mn sq ft transacted area, followed by NCR with 8.9 mn sq ft during the year 2022, the report said.
Continuing with the historical trend, Bengaluru remained the top performer in office leasing recording 28 percent of the total transactions across the eight key markets. In 2022, Bengaluru registered 1.35 mn sq m (14.5 mn sq ft) of office leasing volume, a 19 percent annual growth. The prominent Information Technology (IT) sector, a strong start-up ecosystem, and the expansion of new-age companies in sectors like e-commerce, fin-tech and ed-tech has buoyed the demand for office leasing in Bengaluru, the report said.
Transaction volume in H2 2022, however, moderated to 0.63 mn sq m (6.8 mn sq ft), a 22 percent decline from the corresponding period in 2021. The precautionary stance of occupiers due to headwinds arising from economic uncertainties in the US and the European region has caused moderation in office space leasing in the second half of the year, especially in the last quarter.
Other service sectors, including e-commerce, education, healthcare, and logistics companies, among others, accounted for the highest share at 30 percent, followed by the IT sector at 22 percent of the total space transacted during H2 2022.
The co-working sector also witnessed considerable growth in the share of total transactions from 18 percent in H2 2021 to 21 percent in H2 2022.The manufacturing sector recorded a decline in the share of total transactions from 21 percent in H2 2021 to 12 percent in H2 2022. The jump seen in this sector in 2021 was an exception to the rule. It saw the scale mainly because of a few large transactions, the report added.