GURUGRAM, OCT 21, 2021
The top six cities of India noted about 10.3 million square feet of office gross absorption in the third quarter (Q3) of the calendar year 2021, the highest volume recorded since Q1 of 2020.
After a devastating second wave of the Covid-19 pandemic in the second quarter, the overall absorption numbers rose by 89 percent QoQ (Quarter on Quarter) as occupiers planned for a gradual re-entry and closed deals that were on-hold, leveraging tenant favourable market dynamics. IT sector driven cities Hyderabad, Bengaluru and Pune accounted for 62 percent of gross absorption in Q3 2021.
With increased number of fully vaccinated employees returning to their workplaces coupled with fewer restrictions on mobility, the office market is showing strong signs of revival.
“The quarter has brought in much-needed cheer for the market. Large deals made a comeback, led by demand from flexible workspace operators. Decision-making by occupiers has become quicker than in 2020. We can expect the optimism to strengthen over the upcoming quarters, provided there is no third wave. Occupiers who were exploring renewal options have begun looking for fresh space,” said Ramesh Nair, Chief Executive Officer-India & Managing Director, Market Development -Asia, Colliers.
After an average performance in Q2 2021, Hyderabad emerged as one of the resilient cities in terms of demand supply dynamics. For the first time, Hyderabad had the maximum share in leasing volume at 2.5 million sq ft surpassing Bengaluru, as occupiers focused on large block deals and even leasing entire buildings. BFSI and Flexible workplace sectors had the maximum share in leasing volume accounting for 66 percent of the total demand in Hyderabad. Rai Durg saw the maximum leasing traction accounting for 53 percent of the demand, while Hitec City contributed 40 percent. On a YTD basis, Bengaluru continues to be the market leader.
Leasing share by flexible workspace operators also rose in Q3 2021 owing to high demand from occupiers looking for managed spaces and short-term leases to tide over uncertain times. Share of flexible workspaces in leasing increased to 26 percent in Q3 2021. Leading flexible workspace operators focused on signing large block deals exceeding 100,000 sq ft in almost all major cities seeing increased interest from corporates for managed spaces. Pune accounted for the highest share in flexible workspace, followed by Hyderabad.
The quarter saw the highest supply since Q2 2020 at 10.8 million sq feet in Q3 2021 with Hyderabad and Pune contributing the maximum share at 29 percent and 25 percent respectively. The second wave did not have a major impact on the construction activity. Developers continued to focus on leasing existing stock and received OCs for buildings with pre-commitments.