India’s office supply to grow by 30-35% this year

Meanwhile, gross leasing is expected to grow 15-20% y-o-y. 

As businesses become more capable of adapting to the pandemic, the office property sector is expected to begin its slow but steady recovery. 

Cushman & Wakefield notes that the new generation of employees that have recently joined the workforce in the last two years haven’t been able to experience benefits associated with the workplace – team bonding, an ecosystem of learning from seniors, training & development etc. 

“Leading global employers have been expressing their intent to get employees back to work in order to regain benefits associated with workplace efficiencies / productivity,” the analyst said.

Here’s more from Cushman & Wakefield:

H2-2021 and the record volumes it delivered on commercial leasing suggests that pandemic adversities are now behind us. The near-to-medium term outlook for the commercial office sector looks bright in terms of demand as well as supply. Pent-up leasing activity witnessed in Q3 and Q4 of 2021 is likely to sustain into 2022, with gross leasing expected to grow 15-20% y-o-y. 

This growth momentum is expected to continue on the back of the growth being witnessed in the IT-BPM sector on the back of the global digital transformation. Significant hiring plans announced by the leading tech sector and Global Capability Centres (GCC) in India gives credence to this outlook. Besides IT-BPM, other sectors such as Engineering & Manufacturing, Flex space and BFSI too have been gearing-up for a demand recovery and they all contribute significantly to the office leasing volumes in India.

New supply is expected to witness a 30-35% growth next year as supply is now trying to catch-up with demand across Indian Tier-I markets. However, a significant portion of this upcoming quality supply also comes with pre-commitment. Additionally, with more than 30 million sq. ft. of active demand (or RFPs) floating in the market, core markets could start witnessing dearth of quality supply in the foreseeable future. 

Therefore, a rise in supply is less likely to culminate into a rise in vacancy rates, and we see rents more or less stabilising. Occupiers are likely to put into practice return-to-work programs by end of 1Q 2022 and, thus, would want to secure quality spaces before rents in core markets show signs of a recovery.