Indian firms overtook American firms in annual office leasing in 2022 for the first time, accounting for nearly half of the leasing share during the year, mainly led by flexible space operators, technology corporates, and BFSI (banking, financial services, and insurance) companies, according to a report by realty consultancy firm CBRE. It added that Bengaluru, Delhi-NCR and Mumbai were the cities dominating the absorption by domestic firms.
“A similar trend was witnessed in the October-December 2022 quarter, with domestic firms accounting for a share of 51 per cent in space take-up, followed by American (37 per cent), EMEA (8 per cent) and APAC (4 per cent) firms,” according to the CBRE India Office Figures Q4 2022.
It also said the office sector in India witnessed gross absorption of 56.6 million square feet during 2022, registering a growth of 40 per cent (y-o-y), marking the second-highest leasing activity ever after it touched the peak in 2019 with 65 million square feet. Supply marginally increased from 49.7 million sqft in 2021 to touch 50.6 million sqft in 2022.
As per the report, Bengaluru, Delhi-NCR, Hyderabad and Mumbai accounted for nearly 75 per cent of the yearly leasing activity.
“On an annual basis, technology corporates drove leasing with a share of 29 per cent, followed by flexible space operators (14 per cent), engineering & manufacturing companies (13 per cent), BFSI firms (13 per cent), and research, consulting & analytics organisations (7 per cent). The report points out that small- (less than 10,000 sqft) to medium-sized (10,000 – 50,000 sqft) transactions dominated leasing in 2022 with a share of 85 per cent, similar to the trends observed in 2021,” CBRE said in the report.
Anshuman Magazine, chairman and CEO (India, South-East Asia, Middle East & Africa) of CBRE, said, “With a sustained recovery in leasing, moderating vacancy levels and persistent demand for investment-grade assets, the rental recovery continued across cities throughout 2022. With the relaxation of COVID-19 restrictions, the release of pent-up demand, and a gradual acceleration of return-to-office (RTO) plans by occupiers propelled leasing momentum.”
He added that in line with the trends witnessed in the past, a strong supply pipeline and continued occupier interest in investment-grade buildings by leading developers and institutional owners in core locations is likely to lead to an increase in development completions in 2023.
“With a few challenges emerging across developed economies, the full impact of these risks on global corporates’ leasing decisions is yet undetermined. Amidst this, as India remains an attractive, cost-effective destination with a skilled talent pool, firms will look upto India to optimise their operations and absorption levels could still normalize to levels lower than the peak witnessed in 2022,” CBRE said.
Ram Chandnani, managing director (advisory and transactions services) of CBRE India, said the technology sector would continue to drive leasing activity in 2023. The share of leasing by sectors such as BFSI, flexible spaces, engineering & manufacturing is also expected to increase annually.
“Global corporates would remain committed to India, attracted by its cost and scale advantages and diversity of talent pool. In line with the trends witnessed in 2022, domestic firms’ share of leasing would also become a critical determinant of the overall office market performance in 2023,” Chandnani said.
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