While leasing has declined from April 2020, some interesting trends have emerged in the office space. Occupiers, for instance, are increasingly renewing their office spaces since April 2020 when the pandemic started, as per a joint report by Colliers and Propstack.
Occupiers are looking to be in new-generation offices with modern amenities with focus on health and wellness. There will be more emphasis on flexibility, with occupiers keen to explore co-working spaces for a decentralized workforce.
The report ‘Evolving office space trends in a post pandemic world’ reveals that renewals for office spaces accounted for 23% of the total leasing during the 15-month period starting April 2020. This is up 8 percentage points from the 15-month period pre-pandemic till March 2020.
Bengaluru followed by Mumbai witnessed the highest share of term renewals post pandemic.
“Occupiers are using the current favourable market dynamics to negotiate renewals. They are looking at more flexibility in leases too. Occupiers’ decisions are quicker than last year, with a focus on new-generation offices. Re-entry of employees has started in India, with many companies planning to get back more employees from January 2022. This will prompt occupiers to make leasing decisions quicker,” said Ramesh Nair, Chief Executive Officer | India & Managing Director, Market Development, at Colliers India.
“Occupiers are gradually getting back to their offices, but high-density office space may be a trend that has peaked. COVID-19 may also accelerate a trend from leasing office space in the CBD to suburbs. Corporates will face a challenge to design and modify existing office spaces to support a company’s established culture while following the new health protocols & yet promote social interaction & collaboration,” said Raja Seetharaman, Co-founder, Propstack.
Delhi-NCR and Bengaluru most resilient office markets post pandemic
Delhi NCR and Bengaluru emerged as the most resilient cities in the office markets post pandemic, as per the report. Compared to 15 months pre-pandemic period, these two cities saw the lowest decline in leasing in the 15 months post April 2020.
The leasing in Bengaluru was led by the IT sector, followed by the BFSI sector. In Bengaluru, the BFSI sector’s share in leasing rose to 12% in the months post pandemic, up 6 percentage points from pre-pandemic levels. In NCR, the IT sector’s leasing improved post pandemic.
Overall, total leasing declined 39% in the 15 months post pandemic. Southern cities accounted for 52% of the leasing post pandemic.
BFSI sector gaining ground
Global and domestic BFSI firms expanded their real estate footprint post pandemic. BFSI firms accounted for 15% of the total share in leasing post pandemic, from 10% share before. Bengaluru, Chennai and Mumbai saw traction from BFSI companies led by global in-house centers and insurance firms. Mumbai saw the BFSI sector overtaking the IT sector’s leasing post pandemic.
Overall, co-working leasing share fell to 4% as operators avoided speculative development post pandemic.