Startups Increase the Demand for Office Spaces

After the coronavirus outbreak in March 2020, demand for office space plummeted. Working from home has become more popular, prompting office tenants, particularly in high-end premises, to postpone lease renewals, putting downward pressure on rental rates.

According to a new analysis by Colliers International and CBRE Matrix, startups are likely to lease around 29 million square feet between 2022 and 2024, increasing 1.3 times over the 2019-2021 period. Their share of office leasing is expected to increase from 2% in 2010 to 13% by 2024.

Fintech and logistics firms are regarded as demand drivers for office space in a post-Covid environment, given the growing digital use and e-commerce boom. Bengaluru, with a 34 percent leasing share in 2019-21, is the leading startup hotspot, according to the research, followed by Delhi-National Capital Region. On a year-over-year basis, startup leasing in Delhi-NCR increased nearly thrice in 2021. While there has been significant growth in this area in Mumbai, the relatively higher leasing costs are considered as a barrier for enterprises in the early stages of their operations.

Meanwhile, IT firms continue to dominate office leasing, despite their contribution shrinking in the most recent quarter. According to property consultancy Knight Frank India’s analysis of the commercial realty sector, the IT industry’s proportion of overall leasing transactions in the second half of calendar year 2021 (H22021) has decreased to 27% from 41% in the same period previous year. Nonetheless, with robust demand in the IT sector and several big Indian IT companies already opting for a back-to-work theme, experts predict that demand for office space would gradually recover.