Vestian, in association with FICCI, releases report about ‘Shifting Trends in Indian Office Market’ and understanding the new cogs

Hyderabad, July 7, 2022: Vestian, in association with FICCI, released a report today titled ‘Shifting Trends in the Indian Office Market: Understanding the New Cogs’. This report walks us through the COVID-19 outbreak and sheds light on the key insights that were perceptible in this period.

Sanjay Dutt, Joint Chairman of FICCI Real Estate Committee and MD & CEO, Tata Realty & Infrastructure Ltd., said, “FICCI and Vestian have co-created this report on emerging trends that are being adopted in office spaces by companies across the country. We observe that India is leading to changing work cultures and environments. I am confident that the report’s findings would be useful not only for realtors but also for consumers, the government, research & academic institutes, and the industry. These ideas and deliberations would help us all go a long way in addressing the regulatory challenges and reflect on our way forward.”

Dr Shrinivas Rao, FRICS, CEO, Vestian, said, “This report aims to provide an insight into the various facets that emerged during the pandemic, most of which are still evolving constantly in tandem with the change in scenario. With the COVID-19 event impacting occupier expectations and consequently leading to a shift in market dynamics, it is imperative to understand the opportunities presented in the new environment. Newer cogs such as proptech, ESG implementation and policy changes have emerged on the real estate scene and harbour potential to take the sector to the next level of development.”

Hyderabad has gradually emerged as one of the major IT/ITeS destinations in the country. The advantages offered by the city, such as good infrastructure and a conducive business environment, are both persuasive and competitive. Other major sectors which have their presence in the city include biotechnology, hardware, pharmaceuticals and telecommunications.

Key highlights of Hyderabad in the report:

•    Peripheral office markets in the West, comprising locations such as Madhapur, Gachibowli, Raidurg, and Nanakramguda, continued to lead the office demand, chiefly because over 90% of the Grade A office space, preferred by the IT/ITeS sector and others, is located here.
•    Although the government has been striving towards creating a more equitable development of office space across the city and away from the western hub, not much movement was seen in the peripheral markets towards the east and the south.
•    The decline in office space absorption notwithstanding, the IT/ITeS sector – the mainstay of the Hyderabad office market – continued to lead the demand, barring H2 2021.
•    The period H2 2021 saw the engineering/manufacturing segment take centre stage, their share exceeding that of the IT/ITeS sectors by a fair margin. Interestingly, hardware manufacturers formed a large share of the segment, depicting the growth of Hyderabad as a preferred hub for such activity.
•    While several IT/ITeS companies postponed their expansion plans during the pandemic, many of them opted to take up space in co-working/managed offices as a business continuity measure. Consequently, the share of the co-working operators’ segment has increased substantially since 2021, recorded at 24% of the total absorption in H1 2022.

Gearing up for the future by understanding the New Cogs of the office market dynamics:

•    Push to infrastructure development has been one of the major catalysing factors to stimulate the market in the aftermath of the pandemic. Additionally, policy announcements such as granting infrastructure status to data centres and rebuilding of the SEZ norms would undoubtedly impact the office market.
•    In FY 2021, approximately 30 companies hired 3.6 lakhs freshers, out of which India’s top 5 tech companies such as TCS, Infosys, Cognizant, HCL Tech, and Tech Mahindra have hired 2.3 lakhs freshers. This alone would translate into the absorption of over 18.5 million sqft of office space in India.
•    With ESG coming into the picture, the emphasis on sustainability has driven up considerable investment in green buildings and clean energy infrastructure. Compared with conventional structures, buildings with stronger environmental credentials that depict ESG compliance generate higher rents, fetch higher sale prices, increase retention rates, and also demonstrate lower rates of obsolescence. 
•    India’s co-working spaces, initially occupied by start-ups and freelancers are now seeing increasing preferences by larger corporations in Tier I as well as Tier II cities. Not surprisingly, the sector accounted for nearly 20% of the transacted space during H1 2022 as against 15% in 2021.