The latest report by Colliers shows that the impending recession and economic challenges relaxed office space leasing. The leasing activity in the top six cities during Q1, 2023, stood at 10.1 million square. feet. Although, the figure is a bit lower than what it was in Q1, 2022.
In spite of the economic fluctuation and looming recession, the flex space occupiers are just behind tech-giants’ leasing share. They hold a 20% share, while tech companies have 22% office space leasing.
According to the report, the combination of Non-IT and IT companies takes office space leasing to approximately 42% of leasing in the top six Indian cities.
The flex operator grew because of the strong nature of the business also amplified the leasing. The increase is parallel to that of the tech companies in the Q1, 2023.
Collier in the report was quoted, “Occupiers continue to show interest in flex spaces as they look for ways to control costs while providing convenient workspaces for their employees. Large technology companies are also turning to flex spaces due to their benefits, including flexible lease terms, lower capital expenditures, and modern workplace designs.”
In Colliers view, tech companies lowered conventional leasing mainly because of the anticipation regarding a potential recession and layoffs in the industry.
However, a strategic and cautious approach is advisable, as the vacancy rate in Q1, 2023 is unwavering in comparison to Q4, 2022. However, the increase in demand led to a downfall of 210 basic points in accordance to the last year.
Peush Jain, MD, Office services India, Colliers said, “At a time when occupiers are delaying decision making on leasing office spaces amidst continued economic uncertainties, the office market witnesses signs of stability in Q1, 2023 with the vacancy levels remaining intact at 16.4% compared to the previous quarter.”
The vacancy rate in Delhi-NCR grew from 19.60% to 20.00%, Pune witnessed increase from 16.20% to 16.70%, Hyderabad was a hike from 18.60% to 19.90 %, and Bengaluru recorded a slight growth from 12.70% to 12.80%. Whereas, Mumbai recorded steady vacancy rate of 15.30%, and Chennai witnessed a drop from 19.90% to 16.6%.
Majorly markets across cities are gradually moving upwards with the new supply of office spaces. It will strengthen the situation and the market will grow in the second half of the year, suggest Colliers.
Jain further said, “Going ahead, we expect demand and supply to move in unison, keeping the vacancy and rental levels range-bound. The latter part of 2023 may see signs of strong recovery provided the recessionary concerns lessen in the beginning of the second half of 2023.”
The availability of sufficient new supply of office spaces, developers will make a calculated move by monitoring the scenario.
