2021 is the year we together, turned the corner on COVID-19 with a wider rollout of vaccinations and continued social distancing. The Delta variant slowed down the momentum briefly in Q2, but a quick rebound in H2 suggests that the market is on the cusp of an upswing. Companies have slowly started bringing employees back to offices in H2 2021 while sticking to the Hybrid models. As the market rebounds, occupiers will look at implementing space strategies that they have revised multiple times during 2020-21.
With a significant drop in COVID cases across the country and large-scale vaccinations, there is visible growth in market activity as we end the year. The tech industry is on fast-track and has renewed hiring on the back of robust business growth. Occupiers are getting active and several mid to large scale expansions/consolidations that were paused during the pandemic are gradually moving forward.
Below are some key findings from Cushman & Wakefield’s Office Outlook – 2022
- Robust demand outlook despite third wave concerns
At about 50 MSF, gross leasing volume for 2021 is on par with 2020 and is a notch above the decadal average of 43 MSF. We estimate office demand to reach 57-60 MSF. in 2022, registering a 15-20% growth on an annual basis.
- Supply recovery on the anvil but core markets need more space
New completions at 40 MSF. in 2021 are also on par with 2020, with Hyderabad, Bengaluru, and Delhi-NCR together recording nearly 2/3rds of the supply. We expect the supply situation to improve gradually in 2022 and could reach 45-46 MSF, a 13-15% growth on an annual basis, which would also be 30% higher than the decadal average.
- Coworking – New World, New Workspaces, New Opportunities
Flexibility has emerged as the greatest amenity for occupiers over the last 12-18 months. Continued uncertainty, sustained focus on CAPEX savings, hybrid work policies, Hub-Spoke / Work-Near-Home models, changing employee/occupier preferences resulting in a multi-pronged approach to portfolio strategies, etc. drove the demand. Nearly 55,000 seats were leased out in 2021, a 52% rise on an annual basis. We expect demand to remain robust in 2022 in line with the rise of productivity as a service in the enterprise flex model.
- Expect selective rental growth even as the broader market remains accommodative
We estimate the overall market to remain tenant favourable in 2022 but conditions could vary in certain tight vacancy markets. Resumption in demand will push landlords to take a tough stance and rental growth even if modest could be possible in projects/locations with ultra-tight vacancies. Moreover, institutional landlords and top-tier developers are less likely to budge with less than 10% vacancy rates in their properties.
Watch out, 2022 is set to mark a turning point for the Indian office market.