Commercial
The unending demand for office spaces in 2023
July 24, 2023
Considering India’s commercial real estate, there has been expansive growth with the help of increased employment opportunities, ultimately making it an incubation hub. As the Indian market strengthens for young aspirational minds, the demand for office spaces has been skyrocketing for 2022 and beyond. According to insights from CBRE, India’s office sector has taken up 42.1 million sq. ft marking a growth of 66% year-on-year in 2022. Metro cities like Delhi, NCR, Mumbai, and Bengaluru occupied the highest number of office spaces, contributing to this unparalleled growth since Covid-19.
Hence, the Indian pool has talent and potential, thereby making commercial real estate ahead of its game. To further understand how companies are leveraging this landscape and decoding the real-estate needs, read on.
What is shaping India’s office sector?
There are certain predominant drivers that are working towards India’s fast-growing commercial real estate and will have an effect on trends in the coming year.
Technology, innovation and manufacturing
There has been a certain level of decline in requirements offered by functional space which can be directly associated with the ongoing economic landscape in the country. Decisions that were once easily made are now put to a halt. But thanks to India’s global technology ecosystem and the expediting outsourcing opportunities across diverse industries like healthcare, life sciences, and manufacturing, office spaces are ready to witness demands like never before.
Reshuffle priorities for office space planning
Substantial supply of approx. 58-60 million sq. ft is scheduled to be available in 2023. The average rate at which tenants commit to occupying these spaces ranges from 14% to 17%. However, when it comes to properties owned by institutions, which make up 30% of the upcoming supply, the pre-commitment rates are higher, ranging from 22% to 25%. These figures indicate a preference for high-quality and secure workspaces, with a strong emphasis on factors such as wellness and Environmental, Social, and Governance (ESG) considerations in space planning. Due to the significant supply, development completions in 2023 will lead to increased vacancy rates.
Reconsidering global trends & leasing decisions
Global headwinds have delayed decision-making for international businesses as they consult with their headquarters and assess evolving situations in their home countries. The impact of potential slowdowns in developed economies on leasing decisions in the IT/ITES sector remains uncertain, but India's cost-effectiveness and talented workforce may contribute to increased leasing activity in 2023. Conversely, domestic outsourcing firms may face limitations in expansion due to ongoing contract negotiations.
Evolution of employee-centric office spaces
Organisations will prioritise workplace quality, experiences, and employee engagement as they strive to find a balance between office-based and remote work. They will likely create and implement Return to Office (RTO) and hybrid working policies while exploring new work styles and considering employee preferences.
Based on yearly statistics, Delhi NCR, Bengaluru and Hyderabad have the highest market share at 63% of the net absorption for the year, which was 46.1% higher on a y-o-y basis. Tapping into office space management across various geographic locations, there are 8 major cities contributing to the total commercial real estate in India-
Bengaluru
Mumbai
Kolkata
Pune
Hyderabad
Chennai
Conclusion:
In a nutshell, as India’s workspace segment continues to expand, the premise for enhanced offering and flexibility has seamlessly entered the new normal of workspaces. The gradually increasing physical occupancy levels are proving to be a boon for the commercial real estate sector in India.
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