Office space absorption in six cities touch 54.8 million sq ft in 2022: Savills India
NEW DELHI: Office space absorption across India’s six cities i.e. Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune stood at 54.8 million sq ft, recording a 48.5% increase in 2022, as per data by Savills India, a real estate advisory firm. This was very close to the historic peak of 55.7 million sqft, recorded in 2019, falling short by less than a million sq ft.
Bengaluru recorded its all-time peak at 17.3 million sq ft; and so did NCR and Chennai at 11.3 million sq ft and 7.3 million sq ft respectively. New supply rose by 45.1% at 53.4 million sq ft when compared to 2021.
“The bounce-back further establishes two things: the flex spaces proposition is on solid ground, and secondly, office occupancies have returned resoundingly, even for the tech sector,” said Anurag Mathur, CEO of the company.
Pune and Chennai witnessing the highest annual growth in demand at 119% and 82% respectively.
Bengaluru, Delhi-NCR and Chennai registered all time high leasing activity of 17.3 million sq ft, 11.3 million sq ft and 7.3 million sq ft respectively.
Despite the first half of 2022 recording an all-time-high H1 2022 demand, the second half slowed, as if picking up signals of global slowdown. H2 2022 performance leaves observers wondering if 2022 would have broken all previous records, but for the deceleration in the last quarter. Apprehensions with respect to global growth prospects have put real estate decision making on hold, especially in the last quarter of the year.
IT continues to drive the office market with 38.9% share of total leasing in 2022. With increased adoption of hybrid work, flexible workspaces contribution improved from 12.7% in 2021 to 14.1%in 2022. Banking, Financial Services and Insurance (BFSI) also maintained its pre-eminence at 12.2% share. Engineering and manufacturing, another important segment of demand registered approx. 8.2% share of demand in 2022.
Of the 53.4 million sq ft of new completions across the six major markets, Bengaluru and Hyderabad alone accounted for more than half of the supply addition. While the all-India stock of Grade-A office space stood at over 700 million sq ft, Hyderabad breached the 100 million sq ft mark for the first time in 2022. Hyderabad, with supply infusion of 16.5 million sq ft in 2022, witnessed an outstanding year-on-year growth of 92%.
Average vacancy level has increased marginally from 18.3% in 2021 to 18.9% in 2022 on account of portfolio re-allocations. This has resulted in rentals remaining largely stable.