Introduction
After nearly two years of hardship, the commercial office market is undeniably on the mend. The market will likely gain momentum in the coming months, as most macroeconomic and microeconomic indicators are positive.
According to a Knight Frank report, despite geopolitical pressures, the office market saw robust activity during the first half of 2022 (Jan-Jun) on the back of the waning pandemic and sustained economic recovery. In H1 2022, 25.3 million square feet of office space was transacted across eight major cities, a 107 percent increase from 12.3 million square feet in H1 2021.
The Competitive Landscape
The players in the India Flexible Office Space Market are fiercely competitive. The market’s technological developments have made it easier for new players to enter. To gain a competitive advantage, companies in the India flexible office space market engage in several growth and expansion strategies, such as strategic partnerships, mergers, and acquisitions.
The new supply of office space in India reached 25.11 million square feet in the first six months of 2021, a 75% increase year on year, across major cities (Chennai, Delhi-NCR, Mumbai, Bengaluru, Pune, and Hyderabad), owing to increased confidence among real estate companies in the recovery of workspace demand.
- A fast-growing economy
- Significant expansion is anticipated in knowledge-based sectors such as IT.
- The establishment of new Global Capability Centres (GCCs) and a robust startup system that is giving rise to new unicorns are critical drivers of this growth.
Did you know?
- India’s journey towards a sizable $ 5 trillion economy holds within itself a plethora of opportunities for growth of the commercial office market. According to the data, gross office space leasing in eight significant cities increased to 52.57 million square feet in 2021-22 from 49.42 million square feet the previous year.
- According to Savills India report, the office market in Chennai is expected to grow by 5-10% in leasing activity in 2021. Chennai is expected to see 5.6 million square feet of new completions, representing a 54% increase in supply year on year.
Furthermore, Chennai’s commercial real estate market is booming for various reasons, including the introduction of digitalization, increased tenant confidence, and the relaxation of COVID protocols. Furthermore, overall economic growth, transparency, and competency have persuaded developers and tenants to shift their focus to commercial real estate. However, these are not the only factors driving its expansion across the board. Let us look at the factors that are driving the growth of commercial real estate.
As previously stated, rising economic activity and a return to the workplace have increased demand for commercial real estate. However, one of the factors that are gaining traction is the growing importance of co-working spaces. Another reason for the increased interest is innovative office space concepts, business-friendly initiatives, and first-rate tenant amenities.
Factors Driving the Commercial Office Spaces Marking Upward
- Evolving startups: There has been a massive surge of startups in India that are growing. The leasing of office spaces by startups is expected to rise by 30 percent during 2022-24 across six major cities, according to an Economic Times report.
Flexibility, comfort, and convenience drive the demand for office space in the country. Most businesses in industries such as IT, manufacturing, BFSI, startups, and even boutique firms are looking for office space to meet the needs of their employees.
Furthermore, many businesses plan to establish remote or satellite offices or expand to new locations, increasing demand for these spaces. Today’s high-end, organized, modern office spaces are fully equipped with all the features needed to provide a superior work experience while addressing health and wellness concerns.
- Market trends: Due to a pandemic-driven course correction, the Indian commercial real estate sector is facing dramatic changes in how buildings will be used, appraised, and valued in the present and future.
- Leasing activity is increasing as businesses update their real estate investment holdings to mitigate pandemic effects. Similarly, the hybrid working model facilitated the need for dynamic and intelligent office spaces, thereby supporting the growth of this sector.
- India’s office sector is recovering steadily as leasing activity grew 97% year over year to touch 11.4 million square feet, according to a report by CBRE, South Asia. Bangalore, Chennai, and Delhi-NCR dominated this growth in leasing activity.
- Civic amenities and infrastructure: According to a joint report by Colliers and Qdesq, the adoption of office space in metro and non-metro cities will exceed 60 million square feet by 2023. Furthermore, due to reduced vacancy, prime locations, exceptional amenities, and reasonable leasing prices, global firms are showing interest in Indian commercial real estate for expanding their operations.
- Share of co-working space increased: Co-working and managed office spaces increased their stake in office space absorption, accounting for 21% of total leasing volume in Q1 2022, up from 11% in Q1 2021. In recent years, businesses have preferred managed office space. Unlike owning an office and incurring additional and uncontrollable costs, managed office spaces offer cost-effective, dynamic pricing models.
- Stable rental returns: Rental values have continued to recover, with five of the eight markets experiencing an increase or stability in rental values over the previous year in several cities, especially Chennai.
Did you know?
“According to a recent report, demand for office space increased by 25% year on year in Q1 2022, while commercial project completions increased by 13%”.
Key Developments/Growth in Areas
- As per Economic Times, During January-September, gross leasing of office space nearly doubled to 40.6 million square feet across six major cities, driven primarily by technology and co-working firms. In the previous year, office space absorption in six cities totaled 20.6 million square feet.
- Smaller homes and larger family sizes fueled the country’s growth in flex and co-working spaces. Employees in IT-ITes, BFSI, e-commerce, and professional services emerged as the primary occupants of these flexible working spaces.
- According to the Business Standard report, the office sector in India witnessed a gross absorption of 42.1 million sq ft during the first nine months of 2022, registering a growth of 66 percent YoY in major cities like Chennai.
Invest in Market of India
Market of India is a one-of-a-kind marketplace that effectively centralizes the city’s trade scene, complete with cutting-edge facilities and a central location. We have a diverse range of commercial spaces with world-class infrastructure, including retail, wholesale, and office spaces. Let us jump into some top-notch features and ancillary services available at Market of India, with commercial spaces:
- 2 Acres Central Plaza
- 76 Escalators
- 78 lifts/elevators
- 5000+ shops under a single roof
- 1,00,000 + commodities
Invest in India’s largest upcoming wholesale and retail market, which offers several amenities and infrastructure, a one-stop destination for investing in commercial, office, or retail spaces.
Bottom Line
Did you get an idea of several factors that act as a catalyst in enhancing the growth of commercial office spaces? Explore and select from a variety of commercial office spaces for sale in Chennai. Market of India has plotted commercial spaces in such a way that they are in the leading areas for businesses, with world-class infrastructure and amenities to flourish through better visibility and reach. So what are you waiting for? Book your office space right now! For more details, visit here or contact us at 7358111999.
FAQs
1. What are the factors that determine the demand for office spaces?
Several factors determine a pivotal role in generating the demand for office spaces. The nearby employment hubs, population growth, metro stations, rail connectivity, and the heart of the city location determine the demand for office spaces, which will spur growth.
2. What factors determine the value of commercial office spaces?
Several factors determine the value of office spaces. It is vital to check the economic outlook, population and demographics, location, ancillary services offered, property market performance, and parking facilities for better commercial spaces.
3. Is coworking spaces a good idea?
They are ideal for small businesses, freelancers, remote workers, and startup teams looking to complete tasks and network with corporations that will benefit them. It helps to build employee relationships and enhance business practices.
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