Global economic slowdown, tech layoffs and hybrid work have impacted gross leasing of office space in India, as flexible office space providers share reached almost at par with traditional tech companies in the first quarter of 2023, a report has shown.
Leasing by flex space operators in Q1 2023 inched closer to that of technology companies for the first time ever, according to the report by Colliers India.
Flex space occupiers leased 2.1 million square feet of space, accounting for 20 per cent, a little behind the technology sector's share at 22 per cent.
Together, both the sectors accounted for nearly 42 per cent of the total leasing across top six cities.
"Share of technology sector has declined steadily from 34 per cent in Q1 2022 to 22 per cent in Q1 2023, as corporates continue to focus on building in operational efficiencies through a hybrid model," said Peush Jain, Managing Director, Office services, India, Colliers.
While Hybrid working has impacted demand for conventional office spaces, it has also fuelled demand for flex spaces across top markets.
"As long-term growth drivers for the tech sector remain strong in India, the technology sector will continue to drive office leasing activity through a mix of conventional and flex spaces," Jain added.
Bengaluru and Delhi-NCR were the most preferred locations for top flex operators for their portfolio expansion.
Bengaluru accounted for nearly half of the total flex leasing during the quarter, followed by Delhi-NCR at 30 per cent share.
Occupiers' interest in flex spaces remain unabated as they continue to blend their conventional real estate portfolio in a bid to control costs while providing convenient ways to work for their employees.
Large technology occupiers have also been leasing spaces in flex spaces due to their added benefits such as flexible lease terms, lower capex and modern workplace designs, said the report.
This coupled with ongoing recessionary conditions and layoffs in the technology sector has led to a relative pushback in conventional leasing by these occupiers.
The year 2023 has begun on a cautious note registering a 19 per cent YoY decline in leasing activity across top 6 cities at 10.1 million square feet during the first quarter.
"Although office absorption is currently facing temporary downward pressures, leasing activity will likely pick up especially towards the latter part of the year, driven by strong growth fundamentals," said Vimal Nadar, Senior Director and Head of Research, Colliers India.
