2023 – Key Trends expected to Shape the Indian Office Market

The first half of 2022 had the country coming out of two years of chaos, with a bull run on space take up, while the second half was more cautious in approach due to recessionary clouds in the horizon. As we move in to 2023, it would be interesting to watch out how some of the trends that emerged during the early recovery period of this year getting played out and the new ones that are likely to shape the market in the near future.

Seats as a service
2023 will be influenced by a multitude of global and local factors, and most of them have nothing to do with real estate. However, one key underlying theme which will remain constant and will be a perennial challenge for employers will be the ability to provide a workspace for the employee, where and when he or she wants it. This is where SaaS-RE comes in. SaaS-RE is an emerging trend in the real estate space. It can be defined as ‘Seat as a Service’ and has nothing to do with software. With SaaS-RE, corporate occupiers are changing their approach towards the concept of office, and the demand for office space, read seats, is getting more individualised as compared to being communal. The WFO/H/A is here to stay, so, any action on the real estate side will be geared towards catering to this demand. The recent flexibility given by the SEZ authorities for 100% employees to work from home or anywhere till Dec 31, 2023, will further reinforce this trend.

Strong demand for flex spaces
With employees demanding seat flexibilities, occupiers need to naturally gear their space demands to be in-sync. Hence, we shall be seeing the demand for flexible spaces remaining strong – this not only eases capital expense pressures, but also gives agility to a property portfolio. In fact, occupiers are evaluating flex operators as partners for their pan-India solutions. We could possibly even see the eventual move of the flex operators into Tier 2 cities backed by committed demand from some occupiers.

Segmentation of flex spaces
What is also emerging very clearly is the segmentation of the flex space business. The last 2 years have seen some of the flex operators expand their India network, thus delivering a consistent quality of space and service to a multi-locational wider target market. On the other hand, there are some local players who are city-centric and able to provide cost-effective solutions and services for occupiers who are strongly governed by budgets. There will be enough demand and supply across the price and quality spectrum. That’s good news all around.

Wellness and Sustainability
Employee wellness and sustainability remain key objectives for employers, and we could possibly see many occupiers reworking their spaces to address these. Also, some will take opportunistic decisions to relocate to fresher and newer office buildings – making their offices more attractive for employees to come back to office in full force.

Continued dominance by institutional players
On the supply side, the institutional landlords will continue to increase their market share and also explore investment into any remaining prime properties – developed or under-development. Though I don’t see another office REIT being launched in 2023, we can expect their portfolios to expand.

Overall, it will be a cautious year, where occupiers and landlords will have a keen eye on economic signals at the global level and peoples’ work trends locally.