Mumbai: Crisil Ratings predicts that demand in the commercial office space lease market may remain stagnant in the current financial year. It said 32-34 million square feet of office space could be leased. At the same time, the natural strength in the domestic commercial realty market and the return of employees to the office will boost demand for office space leasing in India over the medium term.
This report reminds that IT and IT-based companies are leading in the domestic office space market with a share of 42-45 percent. Global Competency Centers (GCCs) of multinational corporations have also become a key segment for tenants in the past few years. GCCs account for one-third of the total office space leasing market.
“The net lease volume of office space is affected by two factors in the current financial year. Net recruitment of employees in IT and ITES companies stood. Revenues are down and profitability is under pressure. This sector can focus on cost control. In the wake of macroeconomic challenges in the US and Europe, the GCCs may postpone large-scale leasing plans domestically,” said Gautam Shahi, director of CRISIL Ratings.
Domestically, banking, financial services, insurance, consulting, engineering, pharma and commerce sectors will occupy the remaining share of the office space market. Due to the demand from these, 32-34 million square feet lease can be recorded in 2023-24, Crisil Ratings said.
Favorable arrival of employees..
Crisil Ratings believes that the office space leasing market is being driven by corporate owners wanting employees to come back to their offices. It mentioned that companies, which have allowed work from home until now, are now demanding more days in the week. It explained that if the attendance of employees at offices was 40 per cent in the previous financial year, it will increase to 65-70 per cent in the current financial year.
Saina Katwala, Associate Director, Crisil Ratings, said that the office space leasing market will grow by 10-12 per cent to 36-38 million sq ft in the next financial year despite near-term issues. He said that the growth will be at the same level for the medium term.
Crisil Ratings said that GCCs will lead the office space lease mark in terms of low costs and availability of skilled human resources. The Grade-A office space in Bengaluru, Chennai, Hyderabad, Kolkata and Mumbai MMRs stood at 705 million square feet by March 2023. It revealed that the average office space lease price in Indian cities is low compared to leading cities in Asia.