Bengaluru leads in absorption, new office space completion during Covid: Report

Bengaluru: Vestian, in association with FICCI, released a report on Friday, titled 'Shifting Trends in the Indian Office Market: Understanding the New Cogs'. The report walks you through the office market trends during the COVID-19 outbreak and sheds light on the key insights that were perceptible in this period.

Joint Chairman of FICCI Real Estate Committee and MD and CEO, Tata Realty and Infrastructure Ltd., Sanjay Dutt, said, "FICCI and Vestian have co-created this report on emerging trends that are being adopted in office spaces by companies across the country. We observe that India is leading in changing work cultures and environments. I am confident that the report's findings would be useful not only for realtors but also for consumers, the government, research and academic institutes, and the industry. These ideas and deliberations would help us all go a long way in addressing the regulatory challenges and reflect on our way forward."

FRICS, CEO, Vestian, Dr Shrinivas Rao said, "This report aims to provide an insight into the various facets that emerged during the pandemic, most of which are still evolving constantly in tandem with the change in scenario. With the COVID-19 event impacting occupier expectations and consequently leading to a shift in market dynamics, it is imperative to understand the opportunities presented in the new environment. Newer cogs such as proptech, ESG implementation and policy changes have emerged on the real estate scene and harbour potential to take the sector to the next level of development."

Bengaluru has occupied the epithet of being the foremost office destination in the country. The fact that it is one of the fastest growing metropolitan regions in the country, along with the added advantages of a salubrious climate, a vibrant cosmopolitan population, and a growing knowledge economy, provides the city with an edge over other key Indian cities.

The ORR office market, touted to be most preferred by the IT/ITeS sector, has continued to lead occupier demand, accounting for 42% share in H1 2022.

The peripheral North market has gained momentum on occupiers' radar, occupying a substantial share of the total absorption in H2 2021 and H1 2022.

Contrary to demand constriction expected from IT/ITeS companies, owing to large scale WFH arrangements, the sector continued to drive demand in Bengaluru's office market, accounting for 41% share of the absorption in H1 2022.

Also demand from the IT sector had, however, witnessed a sharp decline in H1 2020 when the pandemic struck. By H2 2021, the sector was back on track buoyed by a hiring spree observed amongst the major IT players.

Another interesting trend seen was regarding the managed offices/co-working segment operators. While the segment went through considerable apprehensions during the initial pandemic period, with most tenants requesting rent waivers or renegotiations on their term agreements, it picked up pace in H2 2021 with the opening up of offices and saw its share in absorption pegged at 24% in H1 2022.

Push to infrastructure development has been one of the major catalysing factors to stimulate the market in the aftermath of the pandemic. Additionally, policy announcements such as granting infrastructure status to data centres and rebuilding of the SEZ norms would undoubtedly impact the office market.

In FY 2021, approximately 30 companies hired 3.6 lakhs freshers, out of which India's top 5 tech companies such as TCS, Infosys, Cognizant, HCL Tech, and Tech Mahindra have hired 2.3 lakhs freshers. This alone would translate into the absorption of over 18.5 million sqft of office space in India.

With ESG coming into the picture, the emphasis on sustainability has driven up considerable investment in green buildings and clean energy infrastructure. Compared with conventional structures, buildings with stronger environmental credentials that depict ESG compliance generate higher rents, fetch higher sale prices, increase retention rates, and also demonstrate lower rates of obsolescence.

India's co-working spaces, initially occupied by start-ups and freelancers are now seeing increasing preferences by larger corporations in Tier I as well as Tier II cities. Not surprisingly, the sector accounted for nearly 20% of the transacted space during H1 2022 as against 15% in 2021.