Why demand for office space is experiencing a lull

livemint.com:

real estate services firm CBRE in the March-ended quarter found that 96% of businesses expected employees to work at least three days a week at office once stability returns, up from 91% last year. Around 40% hoped to have work-from-office fully. A survey by Unispace found 92% of employees expect to work at least four days a week in the office in the near future.

At the same time, hiring is seeing the impact of the global economic slowdown. Top software services players Infosys, Wipro, and HCL Technologies all saw headcounts shrink in the June quarter. Startups, a key driver of employment and office space in cities such as Bengaluru and Delhi-NCR, have laid off over 28,000 employees since last year, as funding has slowed down.

Many businesses are still planning to hire, but the pace has slowed. According to the ManpowerGroup Employment Outlook Survey, the share of employers planning to ramp up hiring in this quarter is down from 63% a year ago to 49%. While economic uncertainty has lowered the demand for office space, one form that is becoming popular across cities is the flexible office space.

This option allows businesses to rent office space on a short-term or month-to-month basis. Besides, some business segments are doing particularly well and driving city-level demand. In 2022, the demand for office space jumped by almost 53% to 50.3 million square feet in the top six cities (Bengaluru, Pune, Delhi-NCR, Mumbai, Chennai and Hyderabad), according to Colliers, a real estate services firm.

However, the economic uncertainty is expected to hurt the demand in 2023. Even in an optimistic scenario, the demand is expected to fall to 35-38 million square feet according to a Colliers analysis in March. In this case, it expects