HomeNewsCommercial Real Estate absorption to grow to 26.8msf in CY22

Commercial Real Estate absorption to grow to 26.8msf in CY22

According to an equity research report prepared by ICICI Securities, India’s office space net absorption is expected to rise from April 2022 onwards and is estimated clock net absorption of 26.8msf in CY22 and 30.0msf in CY23. The report expects cumulative net office absorption of 85-90msf over the next three years from CY22 to CY24.

“The COVID impact has led to companies having to shift to the Work from Home (WFH) model. Commentary from corporates increasingly indicates that they would try to replicate the WFH model over the long term, especially in the case of IT/ITeS companies that account for 40-50% of overall Indian office demand. However, the efficacy of WFH over an extended period of time vs. a traditional full-service office model is yet to be proven,” says the report.

Unlike the residential market which has relatively lower entry barriers in India, the Indian office and mall market is a capital-intensive business requiring developers to have adequate balance sheet strength. Further, the trend has now shifted to office campuses with larger plot layouts which require adequate planning. The few notable names are DLF, Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India REIT, Prestige Estates, Brigade Enterprises, RMZ Corp and The Phoenix Mills.

The Indian Commercial Real Estate (CRE) office market saw record leasing in CY19 with 42msf of annual net absorption. The office market has been in an upcycle over CY14-19 with rising rentals, falling vacancies, consolidation among developers and emergence of REITs. At the beginning of CY20 (January 2020), the outlook was bright with healthy pre-leasing for upcoming supply. However, the evolving global situation owing to the Coronavirus (COVID-19) has led to CY20 net office absorption of 20msf which is a 50% YoY decline with 20msf of net absorption in CY21 as well.

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