Return to work after Covid drives up demand for office space in India: Report

Leasing momentum in India was fueled in 2022 by the removal of Covid-19 limits, pent-up demand, and a steady acceleration of return-to-office plans. The office sector in India experienced gross absorption of 56.6 million square feet during 2022, registering a growth of 40% on an annual basis, according to the findings of international real estate consultant CBRE. This is the second-highest leasing activity ever after it peaked in 2019 with 65 million square feet. According to the report, the amount of commercial real estate on the market grew slightly from 49.7 million square feet in 2021 to 50.6 million square feet in 2022.

Bengaluru led the cities in terms of overall office leasing, with Delhi-NCR and Mumbai leading the absorption by domestic companies. In 2022, domestic businesses outleased American enterprises for the first time, accounting for about half of total leasing, mostly from flexible space operators, technology corporations, banks, and financial institutions, according to a statement from CBRE. Similar to the trends witnessed in 2022, domestic enterprises’ proportion of leasing will be crucial in determining the overall success of the office market in 2023.

Bengaluru, Delhi-NCR, and Hyderabad will continue to be the leading demand generators among large cities, and sustained leasing activity is also anticipated in Mumbai, Chennai, Pune, and Kolkata. Corporates looking to locate near to their talent pool would also continue to pay attention to some tier-II and tier-III markets.

“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,” said Anshuman Magazine, Chairman and CEO – India, South-East Asia, Middle East & Africa, CBRE.

“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 optimize their operations and absorption levels could still normalize to levels lower than the peak witnessed in 2022,” Magazine said.