Growth opportunities in tier-1 and tier-2 cities are driving investment in office space in India. The latest Colliers Global Insights & Outlook – Office Report shows that the office sector in India continues to dominate institutional investment inflows, accounting for over 44% of total investments over the last five years (2018-22).
The Indian office sector has already recorded institutional inflows of USD 0.9 billion in the first quarter of 2023, accounting for 55% of total investments. India’s office space saw steady investment of $3.2 billion since 2018, $2.8 billion in 2019 and $2.2 billion in 2020 the year of covid, reaching a low of $1.3 billion in the covid recovery year of 2021, with investment in office space rebounding to $2.0 billion as companies recovered from the covid-19 crisis.
From 2018 to 2022, the share of total investment averaged 43.8%, with the lowest being 32% in 2021 and 55% in 2018 of total investment in Indian office space by institutional investors.
“Amidst global recalibrations of office space driven by cost control, hybrid work culture, and business slowdown, markets like India continue to benefit due to lower costs with quality of assets, talent pool availability, and increased institutionalized framework. Although global sentiments have reduced the Investor activity in India, institutional buyers remain bullish over the medium to long term as the underlying demand for Office space remains strong and markets like India benefit from the shift in office market dynamics,” says Piyush Gupta, Managing Director, Capital Markets & Investment Services.
In India, office demand has recovered at a faster pace despite ongoing global headwinds in the form of economic disruptions and geopolitical tensions. According to the report, 50.3 million square feet of office space was leased in the 6 largest cities in 2022, more than any other year. The report stated that Q1 2023 started cautiously with total leasing of 10.1m sq ft in the top 6 cities, 19% lower than the same period last year. The sectors that led to an increase in lettings were technology with a 22% share, closely followed by flex space at 20%. Flex space has proven to be a compelling alternative to traditional office space for occupiers as it supports occupiers’ evolving hybrid strategies, the report said.
“As Hybrid working remains the mainstay for occupiers in India, relevance of physical office space remains intact. Occupiers are focusing on optimal locations, high-quality amenities, and well-designed fit-outs as they look to create an enriching experience for their employees,’’ said says Vimal Nadar, Senior Director and Head of Research, Colliers India.
When it comes to office space, the focus is largely on ESG-compliant buildings that have higher operational efficiencies and reduce energy consumption to meet their net-zero targets. On the other hand, developers who take into account the evolving needs of users are integrating smart technologies and sustainable infrastructures into their workplace projects. In the future, Indian office spaces will be equipped with smart technologies such as the Internet of Things (IoT) and predictive analytics for cost optimizations, carbon reduction and better space utilization. With ESG being critical for occupiers, green finance will become an integral part of investors’ strategy. India’s economic resilience, supportive government policies and improving business environment will enable it to maintain its position as an attractive market for global investors in the long run.
-SURESH RATHOD
