The early 2020s will be remembered for events related to the global pandemic. But one thing is unquestionable: it has had an indelible impact on how we conduct business. As we rise from the grip of isolation, businesses are preparing for the unavoidable: the hybrid work environment. We cannot help but wonder what that means for the real estate market, particularly the commercial office space market in 2022? JLL reports state that India’s office market gets anticipated for a 15-20 percent increase in demand and a strong 30-35 percent annual growth in 2022.
We’re venturing into uncharted territory — the wild west of the office space. Some companies provide fully remote positions, while others advocate the “three days in the office, two days from home” approach. Day-long work calls via Zoom and Team meetings are here to stay. In a post-pandemic world, certain companies appear to be betting on a hybrid work model, thanks to technology that has blurred the lines between a physical and virtual workspace. These trends will have an impact on commercial real estate and the market. Companies might choose to recalculate the amount of square footage they lease for their employees as fewer people are in the office. As a result of the decreased demand for office space, the building’s market value gets subjected to leasing revenue, which will lessen. Will there be a market decline for commercial real estate India in 2022?
Real estate experts predict a modest recovery in office space absorption in 2022, owing to the rapid pace of vaccination, the gradual opening up of international travel, and select corporates recalling their employees. According to JLL’s Office Market Update Q3, 2021, the mass vaccination campaign and economic reopening have aided in the revival of the commercial office space market. According to the report by JLL, India’s office market gets anticipated for a 15-20 percent increase in demand and a strong 30-35 percent annual growth in 2022. It owes to the growing traction of the IT industry at a time of increased tech spending and digital transformation from global corporations. 2022 will witness demand for suitable workspaces, freehold commercial properties, and new concepts that will maximize investor returns.
What will the CRE market look like in 2022?
Increased vaccination rates and the services sector’s continued stellar performance have resulted in new absorption and high renewal rates for office spaces, giving commercial real estate an uneven-yet-productive year. According to ICICI Securities in a recent note to clients, net absorption may increase to 26.8 million square feet (MSF) in 2022, up from 18.5 MSF this year. Net absorption of commercial real estate (office space for rent) was around 20 million square feet in 2020, more than halving from the previous year as Covid-19 forced employees to work from home, forcing corporations to postpone or cancel planned leasing.
Bengaluru, Delhi-NCR, and Hyderabad markets accounted for nearly 60% of net absorption during the same quarter. Net absorption includes new subletting in completed buildings and pre-commitments that become operational during the period under consideration but excludes exits/terminations, churns, renewals, and future supply pre-commitments. The rate of new completions has increased, indicating that developers are optimistic about a strong rebound in office leasing activity once normalcy gets restored. According to a recent Cushman & Wakefield study, CATCH 22 Asia Pacific Commercial Real Estate Outlook 2022, the demand for office space for rent in Bangalore will reach 8 million square feet, putting it on par with Beijing. India gets expected to lead the Asia Pacific economy into a growth phase in 2022, surpassing Japan, South Korea, Singapore, and Australia, with a growth rate of 9%.
The co-working segment gets expected to grow in 2022. It will thrive due to its flexibility in these uncertain times. It gets expected to see increased demand in 2022.
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