Office space renewals gaining pace after the pandemic, says report

Occupiers are increasingly renewing their office spaces since April 2020 when the pandemic started, according to a joint report by Colliers and Propstack.

Renewals for office spaces accounted for 23 per cent 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, said the report, titled ‘Evolving office space trends in a post-pandemic world’.

Bengaluru followed by Mumbai witnessed the highest share of term renewals post-pandemic, it said.

“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, CEO, India & MD, 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 space 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 emerged as the most resilient cities in the office markets post pandemic, as per the report. Compared to 15 months pre-pandemic, 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, 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 pc in the 15 months post-pandemic. Southern cities accounted for 52 pc of the leasing post pandemic.

Global and domestic BFSI firms expanded their real estate footprint post-pandemic. BFSI firms accounted for 15 pc of the total share in leasing post pandemic, from 10 pc share before.

Overall, co-working leasing share fell to 4 per cent as operators avoided speculative development post-pandemic, according to the report.