Top

Office occupiers to focus on space efficiency in 2020

Office occupiers to focus on space efficiency in 2020

Bengaluru is expected to continue to be the market leader in terms of demand, with Delhi-NCR and Hyderabad jostling for second place

Colliers, Colliers Research, Office market, 2020, Space efficiency

During 2020, we forecast gross absorption at about 54.3 million sq feet (5.0 million sq meters) in India’s top seven cities. For comparison, 2019 panIndia’s gross absorption was 58.6 million sq feet (square meters). Asia has slowed but is still the world’s fastest-growing major region, and per the International Monetary Fund estimates, the Indian economy is slated to grow at 5.8% in 2020, up from 4.8% growth in 2019.

We believe that the slow GDP estimates for India should have some bearing on enquiries by mid-scale occupiers. Fitch Ratings has stated that the Indian economy is being held back by a large squeeze in credit availability from non-banking financial companies (NBFC). Business confidence has already weakened, falling to a six-year low during August October 2019.

With the tepid business confidence, we foresee occupiers cautious of rapid expansion. We urge occupiers to focus on optimizing space by a) using technology to study user patterns to use space efficiently, and b) incorporating a flex and core model that suit their business needs. We, however, note that efficiency does not necessarily mean smaller spaces,
but efficient usage of space.

We believe that companies from the IT-BPM and technology sectors should continue to dominate demand in 2020, followed by the banking, financial services and insurance sector, and the engineering and manufacturing sector. During 2020, about USD80 billion (INR569,600 crore) worth of IT contracts is up for renewal, and this should give a fillip to demand for immediate office space from IT-BPM companies. While banking companies continue to set up their global in-house centers in India, engineering and manufacturing companies should increasingly look at India to house their innovation and research and development centers.

According to Oxford Economics, Bangalore should achieve average annual real GDP growth of 9.9% over 2020-2024–far above aggregate growth for India of 6.8% and average growth for Asian cities of 3.9% over the same period. The second fastest-growing Asian city should be Ho Chi Minh City on 8.1%, with Hyderabad in third place on 7.8%.

Most Popular