In 2022, Pune witnessed the highest year-on-year absorption of office spaces across the country, reaching 6.4 million square feet (mnsqft), a significant increase from the 2.9 mnsqft recorded in 2021, according to Savills India Research, a real estate research firm. The improved absorption trend was notable in both office and residential real estate during the year, marked by the aftermath of the receding Covid-19 pandemic. As companies adapted to the evolving situation, either adopting hybrid work models or recalling their workforce to offices, the office space absorption, which had been paused in 2020 and 2021, experienced notable growth.
Savill’s research revealed that the top six cities—Pune, Mumbai, National Capital Region of Delhi (NCR), Bengaluru, Chennai, and Hyderabad—collectively absorbed 54.8 mnsqft of office space in 2022, compared to 36.9 mnsqft in 2021. Information Technology (IT) continued to be the driving force in the office market, constituting 38.9% of total leasing in 2022. The increased adoption of hybrid work saw a rise in the contribution of flexible workspaces, increasing from 12.7% in 2021 to 14.1% in 2022. The Banking, Financial Services, and Insurance (BFSI) sector maintained its prominence with a 12.2% share, while the Engineering and Manufacturing sector accounted for approximately 8.2% of demand in 2022.
Interestingly, Pune experienced the highest year-on-year increase in the supply of new office space, recording 7.3 mnsqft, a remarkable 136% increase from the 3.1 mnsqft absorbed in 2021. Nationally, the new supply of office space stood at 53.4 mnsqft, marking a 45.1% increase from the 36.8 mnsqft supplied in 2021. Rental rates remained relatively stable, with a vacancy rate slightly exceeding 18%.
While the first half of 2022 saw robust absorption, caution entered the market in the second half, primarily due to indications of a global slowdown that could impact the Indian markets. Anurag Mathur, CEO of Savills India, highlighted the inherent strength of demand in India. He emphasized the resilience of the flex spaces proposition and the resounding return of office occupancies, even in the tech sector. Mathur expressed optimism about the long-term potential of the Indian office market, acknowledging the need for vigilance and hoping that the policy ecosystem and industry actions would pave the way for a positive trajectory in 2023.
