Vestian, in association with FICCI, released a report today titled ‘Shifting Trends in the Indian Office Market: Understanding the New Cogs’. This report walks us through the COVID-19 outbreak and sheds light on the key insights that were perceptible in this period.
Mr Sanjay Dutt, Joint Chairman of FICCI Real Estate Committee and MD & CEO, Tata Realty & Infrastructure Ltd., said, “FICCI and Vestian have co-created this report on emerging trends that are being adopted in office spaces by companies across the country. We observe that India is leading to changing work cultures and environments. I am confident that the report’s findings would be useful not only for realtors but also for consumers, the government, research & academic institutes, and the industry. These ideas and deliberations would help us all go a long way in addressing the regulatory challenges and reflect on our way forward.”
Dr Shrinivas Rao, FRICS, CEO, Vestian, said, “This report aims to provide an insight into the various facets that emerged during the pandemic, most of which are still evolving constantly in tandem with the change in scenario. With the COVID-19 event impacting occupier expectations and consequently leading to a shift in market dynamics, it is imperative to understand the opportunities presented in the new environment. Newer cogs such as proptech, ESG implementation and policy changes have emerged on the real estate scene and harbour potential to take the sector to the next level of development.”
Kolkata has traditionally been the seat of administration for the state. The city’s office market witnessed a paradigm shift with the opening up of Salt Lake Sector V, a new business district in the suburbs dedicated to the development of the IT sector. Subsequently, office projects came up in the newly developed Rajarhat area, thereby extending the scope of IT development in the city.
Key highlights of Kolkata of the report:
- The IT/ITeS sector, the prime demand driver of office space in the city’s office market, has seen its share gradually reduce with the onset of the pandemic, largely owing to the cautious stance adopted by the companies. From a share of 60% in pre-pandemic H1 2019, it has declined to 25% in H1 2022.
- The BFSI companies, too, adopted restraint post the outbreak while ‘Other Services Sector’ companies such as consulting and education have increased their footprint during the pandemic years.
- Meanwhile, the share of the co-working/managed office segment has grown substantially as companies considered them a suitable option as it gives business owners access to a fully equipped office premise without having to invest in a long-term lease commitment.
- The Kolkata market had come to a standstill in the wake of the pandemic till some activity was witnessed from H2 2021 onwards, reflecting improved business sentiments in the city.
- Of the constricted leasing activity that was witnessed in the city’s office market, Salt Lake Sector V catered to the majority of the office space requirements of companies.
- The office market in Rajarhat New Town, another key employment hub, accounted for an almost equal share of the transactions witnessed by Sal Late Sector V post the pandemic outbreak in H2 2020. However, it could not maintain its hold over potential occupiers, and its share has substantially reduced since then.
Gearing up for the future by understanding the New Cogs of the office market dynamics:
- Push to infrastructure development has been one of the major catalysing factors to stimulate the market in the aftermath of the pandemic. Additionally, policy announcements such as granting infrastructure status to data centres and rebuilding of the SEZ norms would undoubtedly impact the office market.
- In FY 2021, approximately 30 companies hired 3.6 lakhs freshers, out of which India’s top 5 tech companies such as TCS, Infosys, Cognizant, HCL Tech, and Tech Mahindra have hired 2.3 lakhs freshers. This alone would translate into the absorption of over 18.5 million sqft of office space in India.
- With ESG coming into the picture, the emphasis on sustainability has driven up considerable investment in green buildings and clean energy infrastructure. Compared with conventional structures, buildings with stronger environmental credentials that depict ESG compliance generate higher rents, fetch higher sale prices, increase retention rates, and also demonstrate lower rates of obsolescence.
- India’s co-working spaces, initially occupied by start-ups and freelancers are now seeing increasing preferences by larger corporations in Tier I as well as Tier II cities. Not surprisingly, the sector accounted for nearly 20% of the transacted space during H1 2022 as against 15% in 2021.
