Office leasing in India during the second quarter of 2022 stood at 14.7 million square feet (msf), a three-fold jump from the year-ago period. Vacancy levels declined 100 basis points to 17 per cent, led by strong demand from tech and flex occupiers and steady influx of supply, according to a report by Colliers. It added that rentals are likely to firm up in some markets by the end of 2022, led by an upswing in occupancy levels.
“Industrial and warehousing demand stood at 4.5 msf in Q2 2022, a marginal drop about 1.4 per cent year-on-year. Delhi-NCR accounted for the highest share at 28 per cent, followed by Chennai at 21 per cent share. Institutional Investments in Indian real estate touched $1.5 billion during Q2 2022, a 18.8 per cent drop from Q2 2021. The next few quarters are likely to see greenfield investments in office and industrial & logistics sector,” said the report, titled ‘reQ Real Estate Quarterly Q2 2022’.
It added that the RBI’s stance has moved from ‘accommodative’ to ‘neutral’ to control the elevated inflation rate. High inflation rate has led to a rise in construction costs by 10-12 per cent which have impacted planned cashflows and project completions for developers.
“Gross absorption was noted at 14.7 mn sq ft during Q2 2022, a three-fold increase from Q2 2021. Bengaluru, Hyderabad, and Delhi-NCR accounted for almost 64 per cent share in overall leasing during Q2 2022. While we expect supply pipeline to be in tandem with pre-commitments in the market, we foresee some postponement of supply as developers grapple with rising costs,” the report said.
It also added that vacancy levels have declined by a strong 100 basis points during Q2 2022 to 17 per cent led by a revival in demand across all markets. Rentals are likely to firm up in some markets by the end of 2022, led by an upswing in occupancy levels. Tech and Flex occupiers continue to lease large spaces; demand from consulting and BFSI firms surged.
On the industrial market, it said 3PL was the largest demand segment at 60 per cent share, followed by automobile at 13 per cent. Leasing was led by large deals (more than 1,00,000 sqft), which accounted for 75 per cent of the total leasing in H1 2022. Vacancy levels are likely to remain rangebound amidst limited supply and robust demand.
On the investment, Colliers said office assets remain the preferred choice of investment for capital investors accounting for 42 per cent of the investment inflows in Q2 2022. “Investments in alternative assets witnessed a four times increase in Q2 2022, compared to the same period last year. Domestic investors are back in the market with 44 per cent share in Q2 2022, a strong rebound from 10 per cent share in Q2 2021.”
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