Office Leasing To Grow 10-15% in 2023, Next Year: Report

In spite of ebbing growth momentum, commercial leasing activity is likely to grow at a healthy 10-15 per cent this fiscal and the next, a report said on Wednesday..At this growth rate, commercial leasing space will touch 28-30 million sq ft (msf) this fiscal and grow further to 31-33 msf, riding on the improvement in demand as more and more employers are going back to working from office, the report by Crisil said..It added that even at this rate of growth, demand will be below the pre-pandemic high of 42 msf in fiscal 2020, but within sniffing distance of fiscal 2019 level of 34 msf. This is attributable to growing global recessionary headwinds and slower hiring in technology companies, subduing demand growth..It also said credit profiles of commercial realtors will continue to be healthy during these two years, backed by adequate leverage..The report is based on an analysis of players with over Rs 63,000 crore debt and total leasable area of 170 msf..Grade-A office space has an operational stock of around 670 msf as of March 2022 across the seven major cities of Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, Delhi-NCR, and Pune..According to Anand Kulkarni, a director with the agency, after gathering pace in the first half of this fiscal, office leasing will fall back temporarily in the second half. However, next fiscal, leasing growth will be supported by three factors -- firstly, the IT/ITeS sector, which accounts for 45 per cent of office leasing space, will continue to witness low single-digit employee addition in the current and next fiscals..Secondly, physical occupancy at offices across sectors will increase from 30-50 per cent now and thirdly, the domestic economy remains resilient and sectors such as BFSI, consulting, engineering, pharma, and e-commerce, which account for 30 per cent of the domestic office area, will add office space..Indian cities are far cheaper than their Asian counterparts, with average Mumbai rentals coming in at Rs 130/sf, Bengaluru at Rs 95 and NCR at Rs 80. This is way below their Asian peers such as Shanghai (Rs 275), Seoul (Rs 200), and even Manila (Rs 150); and significantly lower than global metros such as Singapore (Rs 650), London (Rs 600), New York and Tokyo (Rs 550 each), Hong Kong (Rs 500), and Sydney (Rs 400)..However, the occupancy level is likely to stagnate at 84-85 per cent this fiscal, as against the agency's earlier expectation of an improvement by 100-150 bps, due to deferment of leasing plans..Notwithstanding, the occupancy level is expected to inch up by 100 bps to 85-86 per cent next fiscal as leasing activity picks up, it added.(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Office Leasing To Grow 10-15% in 2023, Next Year: Report

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