US, Europe downturn and WFH hit office space leasing in India

It may be too early to make an estimate, but the two-and-a-half-time growth recorded in office space leasing in the first half of 2022 may now be difficult to match in the rest of the year, they said.

More than a dozen requests for proposal for leasing office space have been withdrawn in the past six weeks, they said. Many of the companies are also resizing their operations, which means they may cut down on office space requirement as well.

Amazon, which has taken half a million sq ft from DLF in Gurgaon, has decided to not exercise its option to lease another 100,000 sq ft for now, said one of the people ET spoke to. “Paytm, which had taken 550,000 sq ft in Noida, is looking for another tenant to fill the space since its own employees are still working from home,” he said. “Many other companies are also doing the same as return to office has been slow.”

Amazon India did not respond to an email seeking comment. A Paytm spokesperson said the technology firm’s teams have been adapting to a hybrid model. “Aligned with this and our sharpened focus on resource allocation, we are exploring options on the optimum use of office space,” the spokesperson added.

A DLF spokesperson said leading workspace occupiers were taking up high-quality assets from credible developers. “For us, this has translated into higher enquiries and space take up,” he said. On a query about Amazon, the spokesperson said, “One tenant, given their business expansion, has converted his hard option from one tower to another.”

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According to property consultants, up to 45% of the employees have returned to offices since the pandemic. While this has been 80% in the BFSI sector, in IT, which employs millions and occupies large office space in India, only 30-35% have returned on a regular basis.

“Even within the IT companies, return to work in the top three firms is only up to 20% … This coupled with the global slowdown, will impact the leasing activity,” said a consultant.

Anshuman Magazine, chairman, India, Southeast Asia, Middle East & Africa at property consultancy CBRE, said it may be early to assess the impact of an impending economic slowdown on demand. “The impact, if at all, may only be gauged towards the end of the year or in H1 2023,” he said.

As of now, he expects the momentum in leasing activity from the first half of the year to continue.

As much as 29.5 million sq ft of office space was leased in the January-June period of 2022, up 157% from a year earlier. About 28-32% of the space leased during the period was due to culmination of earlier contracts.

“We expect sustained domestic leasing activity in the office sector as global and domestic conglomerates continue their hiring spree and will keep the leasing momentum ongoing,” he said.