Gurugram –The top six cities of India noted about 10.3 million sq ft of office gross absorption in Q3 2021, the highest volume recorded since Q1 2020. After a devastating pandemic second wave in the second quarter, the overall absorption numbers rose by 89% QoQ as occupiers planned for a gradual re-entry and closed deals that were on-hold, leveraging tenant favourable market dynamics. IT sector driven cities Hyderabad, Bengaluru and Pune accounted for 62% of gross absorption in Q3 2021. With the increased number of fully vaccinated employees returning to their workplaces coupled with fewer restrictions on mobility, the office market is showing strong signs of revival.
“The quarter has brought in much-needed cheer for the market. Large deals made a comeback, led by demand from flexible workspace operators. Decision-making by occupiers has become quicker than in 2020. We can expect the optimism to strengthen over the upcoming quarters, provided there is no third wave. Occupiers who were exploring renewal options have begun looking for fresh space,” said Ramesh Nair, Chief Executive Officer | India & Managing Director, Market Development | Asia, Colliers.
Hyderabad emerged as market leader in terms of office sector demand in Q3
After an average performance in Q2 2021, Hyderabad emerged as one of the resilient cities in terms of demand-supply dynamics. For the first time, Hyderabad had the maximum share in leasing volume at 2.5 million sq ft surpassing Bengaluru, as occupiers focussed on large block deals and even leasing entire buildings. BFSI and Flexible workplace sectors had the maximum share in leasing volume accounting for 66% of the total demand in Hyderabad. Rai Durg saw the maximum leasing traction accounting for 53% of the demand, while Hitec City contributed 40%. On a YTD basis, Bengaluru continues to be the market leader.
Robust leasing activity observed in the flexible workspace sector
Leasing share by flexible workspace operators also rose in Q3 2021 owing to high demand from occupiers looking for managed spaces and short-term leases to tide over uncertain times. The share of flexible workspaces in leasing increased to 26% in Q3 2021. Leading flexible workspace operators focussed on signing large block deals exceeding 100,000 sq ft in almost all major cities seeing increased interest from corporates for managed spaces. Pune accounted for the highest share in flexible workspace, followed by Hyderabad.
Highest supply since Q2 2020
The quarter saw the highest supply since Q2 2020 at 10.8 million sq feet in Q3 2021 with Hyderabad and Pune contributing the maximum share at 29% and 25% respectively. The second wave did not have a major impact on the construction activity. Developers continued to focus on leasing existing stock and received OCs for buildings with pre-commitments.