The demand for office space may rise 14% this year to 60 million square feet across eight cities, mainly driven by strong rebound in Indian economy and aggressive hiring plans in IT/ITeS sector as well as startups, according to real estate consultant Cushman & Wakefield.
As per the data, the gross leasing of office space across eight major cities increased to 52.57 million square feet in 2021 from 49.42 million square feet in the preceding year. The eight cities are Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad and Ahmedabad.
"India's journey towards a sizable $5 trillion economy holds within itself a plethora of opportunities for growth of commercial office market," said Badal Yagnik, MD, Tenant Representation, India, Cushman & Wakefield.
He pegged annual leasing activity over the next two years at close to 60 million square feet each.
"Key triggers driving this growth are a fast-growing economy, significant expansion foreseen in the knowledge-based sectors such as IT, setting up of new Global Capability Centres and a robust start-up system that is giving rise to new unicorns," Yagnik said.
In its 'Five trigger points for Commercial Real Estate 2022' report, the consultant has listed robust post-pandemic economic recovery; strong hiring activity by the IT-BPM sector; re-imagining the future workplace; vibrant startup ecosystem; and institutionalisation of commercial real estate and proptech ventures as major demand drivers for office space.
"I have always been most optimistic about a strong recovery in India's office market and am not at all surprised by the gross leasing numbers we are likely to end with, in 2022-23 in top 8 cities," said Gagan Randev, Executive Director, India Sotheby's International Realty.
With GDP growth of 7-8% predicted for the next few years, he said, India will be one of the top growing countries of the world.
"This will throw up a host of interlinked opportunities and the need for more office space. We continue to remain one of the lowest cost Grade A office rental markets, with a vast pool of english-speaking and qualified human talent," Randev said.
He noted that physical offices offer the most conducive environment to keep people motivated and encouraged.
Most companies have used the pandemic years to refashion the interiors of office spaces to cater to the health and wellness norms, to bring employees back to work, safely, Randev added.
According to the Cushman & Wakefield report, there has been a strong rebound in India's economic activity.
For a deep-rooted sector having linkages to 250+ industries, rising economic prowess globally is beneficial for the real estate sector, the report said.
The consultant noted that the boost in IT-BPM sector and entry of GCCs would drive office demand.
"The start-up growth story and GCC hiring plans in India come as a double boost along with the IT-BPM growth story," it said.
The consultant expects Indian start-ups to go on a hiring spree. "With funding received from venture capitalists, start-ups in India have been progressively increasing their headcount. There are plans to hire close to 2.5-3.0 million people in the medium term (2022-2026)."
This surge in hiring will have direct impact in the real estate sector as start-ups largely operate in high-value segments, it added.
The consultant observed that the Covid pandemic has forced corporate occupiers to look at de-densification, health & wellness, and ESG on priority as they manage return-to-work of their employees.
"De-densification to reinforce demand for office. Requirements of six-feet office would result in 25-30% more demand for office space by occupiers given the same number of employees," it said.
Many developers are now going for LEED and WELL Certification, thereby increasing focus around environment, sustainability and well-being, the report said.
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