Bengaluru, Hyderabad and Chennai contributed 58 per cent to total office leasing and 70 per cent to new supply during Q3 of this calendar year.
India’s most prominent office market Bengaluru remained slow during the July-September period as office space gross leasing fell by 28 per cent year-on-year while new supply declined 25 per cent, according to Vestian.
Real estate consultant Vestian expects office demand in Bengaluru to rise with large IT companies calling their staff back to office.
Vestian has released its office market report for the third quarter of this calendar year, showing 21 per cent growth in office leasing and 26 per cent increase in new supply across top seven cities.
As per the data, the absorption of office space in the July-September period rose 21 per cent year-on-year to 15.9 million square feet across seven major cities — Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Delhi-NCR and Kolkata.
Across these seven cities, the new office space supply increased 26 per cent annually to 13.4 million square feet during the third quarter of this calendar year.
Shrinivas Rao, CEO, Vestian, said, “In Q3 2023, the Indian office sector witnessed heightened real estate activities as absorption reached the highest level since pandemic and new completions increased to a five-quarter high.”
The sector also reported healthy vacancy levels with an appreciation in average rentals, Rao said. “This showcases the robust fundamentals of the sector and a healthy demand for quality office spaces in India,” Rao noted.
City-Wise Trend of gross leasing and new supply during July-September:
Interestingly, Bengaluru — the largest office market with a huge presence of IT companies — witnessed a significant decline in leasing transactions and the new supply. In Bengaluru, the absorption of office space fell 28 per cent year-on-year to 3.6 million square feet during the July-September quarter. The new supply also declined 25 per cent year-on-year to 2.7 million square feet.
Leasing of office space in Delhi-NCR also fell 14 per cent year-on-year to 3 million square feet during July-September. New office space supply plunged 82 per cent to 0.5 million square feet.
During the July-September quarter, the leasing transactions of office space in Chennai rose 82 per cent to 2 million square feet. The new supply was up 71 per cent to 1.2 million square feet.
In Hyderabad, the leasing of office space jumped 270 per cent to 3.7 million square feet. New supply soared 175 per cent to 5.5 million square feet.
Leasing of office space in Mumbai rose 21 per cent to 2.3 million square feet. New supply jumped 125 per cent to 0.9 million square feet.
Pune witnessed 83 per cent increase in office leasing to 1.1 million square feet. New supply rose 73 per cent to 1.9 million square feet.
Kolkata office market saw 0.2 million square feet of leasing transactions and 0.7 million square feet of new supply.
| Demand-Supply Dynamics (Gross Leasing) | |||||||
| City | Absorption (Mn sq ft) Q3 2023 | Absorption (Mn sq ft) Q3 2022 | Y-o-Y Change (%) | Q-o-Q Change (%) | New Completions (Mn sq ft) Q3 2023 | Y-o-Y Change (%) | Q-o-Q Change (%) |
| Hyderabad | 3.7 | 1 | 270% | 61% | 5.5 | 175% | 34% |
| Bengaluru | 3.6 | 5 | -28% | -3% | 2.7 | -25% | -23% |
| NCR | 3 | 3.50 | -14% | 50% | 0.5 | -82% | NIL |
| Mumbai | 2.3 | 1.90 | 21% | 28% | 0.9 | 125% | 200% |
| Chennai | 2 | 1.10 | 82% | -9% | 1.2 | 71% | -43% |
| Pune | 1.1 | 0.60 | 83% | -39% | 1.9 | 73% | 138% |
| Kolkata | 0.2 | 0.01 | NA | 100% | 0.7 | NA | NA |
| Total | 15.9 | 13.11 | 21% | 14% | 13.4 | 26% | 19% |
On the demand-supply trend, Rao said, “The key office markets in Southern cities evolved and commanded the highest share of the pan-India absorption and new completions.”
“Rentals are expected to rise in these cities on the back of renewed demand as many large conglomerates are calling their employees back to the office,” he observed.
Office space occupiers’ profile:
IT-ITeS sector dominated leasing during the July-September period with 25 per cent share. The BFSI sector accounted for 20 per cent of the total absorption in the third quarter of 2023.
Moreover, Manufacturing & Engineering and Flexible Space sectors accounted for 17 per cent and 16 per cent share, respectively, in Q3 2023.
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