Indian office market records 38 million sqft absorption between January-September 2023

Bengaluru and Delhi NCR drove demand with about 50% share in gross leasing. Demand more broad-based across sectors - Technology sector dominant at 25% share, Flex, Engg & Manufacturing, BFSI share at 15-20% each.

File photo
File photo

The first three quarters of 2023 recorded 38 mn sq ft. of gross absorption across top 6 cities, almost equivalent to the gross absorption of corresponding period in 2022; signaling sturdy momentum, despite ongoing global volatility. South cities contribute almost 60% of the office demand from January-September 2023.

2023 has been characterized by demand diversification. Although technology sector continues to drive the demand with a 25% share in YTD leasing, demand is now more broad-based spanning across sectors. The shares of flex spaces, Engineering & Manufacturing and BFSI sectors have seen significant sectoral gains by up to 6 percentage points (pp) each.  Flex spaces, especially, continue to perform well in 2023, as occupiers continued to prefer dynamic working arrangements for their portfolios. Overall, Bengaluru and Delhi NCR were the most preferred locations for flex players for their expansion.

While foreign origin companies have been driving the office space demand pre-pandemic, domestic occupiers have become active influencers in India’s office market 2022 onwards.  Despite the global economic volatility, domestic occupiers accounted for almost half of the office space take-up in 2023.  While tech occupiers both domestic and foreign, prolonged their real estate portfolio level decisions, domestic companies especially from the Engineering & Manufacturing, BFSI, Pharma & Healthcare and flex spaces stepped up and took up incremental office space across the top 6 cities of India.

During YTD 2023, new supply across the top six cities dipped 1% YoY. Around 33 mn sq ft. of developments were completed in first three quarters of 2023.  Hyderabad witnessed significant new completions, contributing to 37% of the total new supply, closely followed by Bengaluru with 33% share. The first three quarters of 2023 has seen an average of 10.9 mn sq ft of new deliveries, at par with the 10.7 mn sq ft quarterly average of 2022. Led by nearly steady demand and supply influx, overall vacancy and rentals remained range bound.