Return to offices post Covid propels office space demand in India: Report

New Delhi: A relaxation of Covid-19 restrictions, pent-up demand, and a gradual acceleration of return-to-office plans propelled leasing momentum in India in 2022. As per the findings of multinational real estate consultant CBRE, the office sector in India witnessed gross absorption of 56.6 million square feet during 2022, registering a growth of 40 percent on a yearly basis, marking the second-highest leasing activity ever after it touched the peak in 2019 with 65 million square feet.

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It said the supply of commercial real estate marginally increased from 49.7 million sq. ft. in 2021 to touch 50.6 million sq. ft. in 2022. Amongst the cities, Bengaluru emerged as the frontrunner in overall office leasing followed by Delhi-NCR and Mumbai dominating the absorption by domestic firms."It is a first that domestic firms surpassed American firms in annual leasing in 2022, accounting for almost half of all leasing, mainly from flexible space operators, technology corporations, banks, and financial institutions," CBRE said in a statement.

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In 2023, domestic firms` share of leasing will play a critical role in determining the overall performance of the office market, similar to the trends seen in 2022.

Amongst major cities, Bengaluru, Delhi-NCR, and Hyderabad would remain the biggest demand drivers, while sustained leasing activity is also expected in Mumbai, Chennai, Pune, and Kolkata. Select tier-II and tier-III markets would also continue to attract attention from corporate preferring to locate closer to their talent pool.

"With the relaxation of COVID-19 restrictions, the release of pent-up demand, and a gradual acceleration of return-to-office (RTO) plans by occupiers propelled leasing momentum," said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.

"With a few challenges emerging across developed economies, the full impact of these risks on global corporates` leasing decisions is yet undetermined.

Amidst this, as India remains an attractive, cost-effective destination with a skilled talent pool, firms will look upto India to optimize their operations and absorption levels could still normalize to levels lower than the peak witnessed in 2022," Magazine said.