India Office Market Beyond the Pandemic: will coworking demand plateau away?

Real estate leading players with AUM in India are looking at workspaces as markets move towards post-Covid stability

August 11, 2022Real Estate

Yes, the India office market continues to excel with sales at relatively optimistic pricing post-Covid-19. But we know the headwinds: rising inflation, occupier work preferences changing and market pressure coming from ESG challenges. At such a juncture, concerns have been raised that the prime commercial office might not be the jewel in the crown for portfolios. 

These disruptions and concerns were the meeting’s overview of a private roundtable discussion between decision-makers in the commercial real estate market in India. It seems that smart investors, developers and operators are rather rethinking their game to reposition office assets and unlock value. According to data shared during GRI's private session, people have started returning to office with parks recording foot falls of over 50% in Bangalore and Hyderabad. Mumbai numbers are higher and close to 75%.

Notably, commercial leasing is making a strong come back in India with Bangalore and Hyderabad leading the way. Absorption in Pune, NCR and Chennai has also been encouraging. While the market is still wary of Hyderabad’s over supply, the RFPs in the city are quite encouraging. 

It is undeniable that office demand in India is seeing an uptick as occupiers realize the lack of physical infrastructure in a working-from-home scenario: a 16% increase in demand vs the same quarter previous year is a validation of these trends and an indication of strong business outlook.¹ 

The GRI Club Meeting took place in Bengaluru last month, in July and gathered leading CRE players with AUM and capital at risk in India. The session was co-hosted by our club-partner, EverVantage.


Coworking demand – present and future 

Some attending seniors in the GRI Club meeting forecasted an absorption of more than 75mn sft in the next 3 years as outsourcing to India will increase. But looking at the larger picture, some are of the opinion that coworking demand will plateau away in sometime as markets move towards post-Covid stability. From investors’ lens, the market is well on track to see absorption of close to pre-Covid levels in India. 

Meanwhile, organizations are struggling to select the ideal workplace. A recent survey led by Club Member Ramesh Nair (CEO, Asia Colliers) in collaboration with operator Awfis show that about 70% of the occupiers are looking at having some sort of flexibility in their working models given the hybrid working model trend.² 

“Employee wellness has now become an integral part of real estate decision-making for occupiers. Occupiers are paying heed to aspects such as work-life balance and the mental well-being of employees. As occupiers weave in employees’ wellbeing along with furthering business goals, we see an overarching theme of distributed workplaces in their plans.” – Ramesh Nair (CEO, Asia Colliers)

IT and new technology companies represent the lowest rate of return to office (0-25%), while telecom and consulting sectors show the highest rate (75-100%). 


How to deal with negative pressure on rent and increase in vacancy and leverage?

Offices’ Investment Demand will be one of the topics in India GRI 2022. The event will gather the most relevant and senior leaders, 62% of which are from the Indian CRE sector. Check out the full agenda.  

India GRI 2022


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(²) - Workplace & Flexibility: Colliers Awfis C-suite Survey 

- Written by Lucas Brancucci