Startups lap up office spaces in top metro cities
BENGALURU: Startups leased about 2.2 million sq. ft of office space in 2021 in the top three metros of India—delhi-national Capital Region, Mumbai and Bengaluru—marking a 56% rise from 2020 in tandem with a spate of $1 billion-plus valuations.
The biggest spurt was seen in Delhi-ncr, where startups leased office spaces mostly in Gurugram, during a time when India saw 42 startups joining the unicorn club in 2021, according to property advisory Colliers India.
Overall, offices across the top six cities leased 33 million sq. feet of space, 10% higher than in 2020. All cities, except Bengaluru and Delhi-ncr, surpassed the annual average of 2016-18.
“The year 2021 has emerged to be better than expected, considering the devastating wave we saw during the year. Demand continues to be led by technology companies. However, we are seeing a greater appetite for office space by startups. The year 2022 will be even better, even if the concerns of Covid-19 persist. Gross absorption in 2022 will be about 15-20% higher as occupier confidence is back in the market,” Ramesh Nair, chief executive officer-india and managing director for market development-asia at Colliers.
Delhi-ncr registered a 50% increase in leasing activity in 2021. Gurugram accounted for almost 64% share as companies relocated to better quality buildings in micro-markets such as
Golf Course Extension Road and centralized locations such as Cyber City and MG Road.
Recently completed buildings are seeing greater traction as businesses consolidate their portfolios in Grade A buildings with better wellness standards.
A similar trend is seen in other cities as businesses explore next-generation offices and developers offer futureproof office spaces.
Last year also saw 35 million sq. ft of new supply, similar to 2020, as developers cautiously aligned new supply in response to market demand.
“Office occupancy is likely to rise in prominent office districts with quality grade A stock. Occupiers have already started preferring next-generation offices. In tune with this, we expect supply in 2022 to be around 35-38 million sq. ft, 4% higher than the 2021 levels,” said Vimal Nadar, senior director and head of research, Colliers India. Flex or shared spaces expanded at a fast pace in 2021, led by occupiers’ hybrid and decentralized work plans. During the year, flex spaces leased about 4.8 million sq. ft of space, a 60% rise from 2020.
Flex office space leasing accounted for 15% of leases, compared to 9% in 2020. Bengaluru led the way, followed by Hyderabad and Pune.
Operators are leasing space for new centres in suburban and peripheral locations as occupiers explore and adopt new decentralized working with hub and spoke-style offices.
“Hyderabad leapt to the top three cities led by some large block deals in the December quarter. Bengaluru accounted for the highest share at ~30%, followed by Delhi-ncr and Hyderabad at 19% and 18%,” said Arpit Mehrotra, managing director-office at Colliers.