Following the coronavirus outbreak in March 2020, demand for office space dropped. In addition, the growing tendency of working from home has caused office space occupants, particularly in Grade A facilities, to postpone lease renewals, putting downward pressure on rental rates.
According to a new report by investment management firm Colliers and real estate agency CBRE Matrix, startups are estimated to lease around 29 million square feet between 2022 and 2024, up 1.3 times from 2019-2021. As a result, their share in office leasing is expected to increase from 2% in 2010 to 13% by 2024.
Fintech and logistics startups are regarded as demand drivers for office space in a post-Covid environment, given the growing digital adoption and e-commerce boom. According to the research, Bengaluru, with a 34% leasing share in 2019-21, is the leading startup hub, followed by Delhi-National Capital Region.
Every year, startup leasing in Delhi-NCR increased thrice in 2021. While there has been significant growth in this area in Mumbai, the relatively higher leasing costs are considered as a barrier for enterprises in the early stages of their operations.
Meanwhile, IT firms continue to dominate office leasing, despite shrinking contributions in the most recent quarter. According to property consultancy Knight Frank India’s analysis of the commercial realty sector, the IT industry’s proportion of overall leasing transactions in the second half of the calendar year 2021 (H22021) has decreased to 27% from 41% in the same period the previous year. Nonetheless, with robust demand in the IT sector and several big Indian IT companies already opting for a back-to-work theme, experts predict that demand for office space would gradually recover.
