Co-working leads the office space boom in India

Their share in office space rentals has grown sharply, because of hybrid work formats, instead of being wiped out by the pandemic predictions about co-working spaces.

The report of real estate researchers shows that co-working spaces saw an 8 per cent growth on a year-on-year YoY basis, with companies getting back to work. There were 34.1 million square feet of net. Approximately 4.43 mn sq.ft of office space has been leased this year, 13 per cent of which has been taken up by co-working spaces, which has come to around 4.43 mn sq.ft.

The jump is a significant 8 per cent increase over FY 20 - 21 share of 5 per cent of the net absorptions of 21.32 mn sq. This also marks the highest jump in office space absorption. The manufacturing and industrial sectors rose 4 per cent on a YoY basis, while IT and ITeS sectors saw a decline of 8 per cent and 6 per cent during the same time.

The hybrid work model emerged as a formidable new force in the Indian office real estate market during the Pandemic, said Anuj Puri, Chairman- Anarock. There was a gradual transition to flexible spaces that give businesses and employees the flexibility to continue operations. Co-working spaces have become the preferred option to adopt the hybrid work model, compared to the other options of changing office layouts or the hub- and- spoke model. Anarock's data shows that large deals' are more than 0.1 mn. Nearly 50 per cent of the total office transaction in top 7 cities in FY 22 was accounted for by sq.ft compared to 47 per cent in FY 21. The mid-sized occupiers saw a marginal rise of 1 per cent of total office leases in FY 22, while smaller deals saw an annual dip of 4 per cent.

Puri said that mid and large deals were prominent in the current financial year as occupiers are optimising their portfolios. A better hiring scenario, increased assessment of new leases and a return to the workspace are some of the new realities. The supply side saw growth as well. In top 7 cities, the sq, ft has gone up by 27 per cent against FY 21. The southern cities of Chennai, Hyderabad and Bengaluru dominated the new completions with a total of 58 per cent share at around 29.85 mn sq. After fresh completion, the average vacancy levels across the top 7 cities went up by 1 per cent -- from 15 per cent in FY 21 to 16 per cent in FY 22.

With new supply, vacancy levels have increased across the country. NCR has the highest office space vacancy among the top 7 cities, followed by Kolkata and MMR at 23.5 per cent and 15.75 per cent respectively. Pune has an office space vacancy rate of 8.5 per cent.