Office vacancies stay stable as companies start bringing staff back

Vacancies in grade A office space markets across the top six cities remained stable for the first time after two years of constant increase in the first quarter ended March at 18.5% with companies reviving expansion plans and employees returning to work.

Office vacancy had been increasing by around 2% every successive quarter since the second quarter of 2020 due to occupier exits and slower demand amid the Covid-19 pandemic, according to Colliers, a real estate services and investment management company. In the latest quarter, however, commercial developers like Embassy REIT, Prestige Office Venture, DLF, Brookfield, and RMZ have reported either reduced or stable vacancy in their office portfolio, industry insiders said.

“This quarter has seen occupier confidence swinging back with considerable large-sized deals that accounted for a whopping 55% of the leasing during the quarter,” said Ramesh Nair, CEO, India, and managing director, market development, Asia, at Colliers. “This clearly shows that occupiers are consolidating offices as they prepare for workplace-led innovation and collaboration.”

He said the second quarter of 2022 “will be a crucial period as we expect more companies to open up workplaces”. “If the overall leasing momentum continues, then the year 2022 is likely to be a promising year,” Nair said.

Gross absorption in the first quarter of the calendar increased almost three times year-on-year (YoY) to 13.0 million sq feet – the highest in two years, according to Colliers. This shows that the first quarter has been a watershed period for the commercial office sector, with the office sector shrugging off the relatively low demand seen over the last two years.