Office space absorption across India’s six major cities stood at 27 mn sq. ft. declining by 12% as of June 2023, according to global real estate advisory firm, Savills India. Meanwhile, the first half of 2023 also witnessed 16% decrease in new supply infusion at 25.5 mn sq. ft. With this, the total Grade A office market stock in the country stands at 727 mn sq. ft. as of Q2 2023.
The IT sector remains the primary demand driver, with flexible workspaces rebounding as a strong driver of office demand and BFSI retaining its position in the top 3 drivers. The demand from the coworking/flexible workspaces sector has rebounded registering a 7% growth YOY. The segment is the second-highest contributor to overall demand in H1 2023.
Demand contribution from the BFSI occupiers witnessed a robust growth of 70% YOY, contributing 14.4% to the leasing activity. Chennai maintained its position in the top three markets similar to the year 2022, while Bengaluru and Delhi-NCR have consistently held their top spots for years.
Collectively, Chennai, Bengaluru and Delhi-NCR accounted for 63% of the gross leasing activity in H1 2023. Large and medium-sized deals (over 100,000 sq. ft. and 25,001-99,999 sq. ft.) comprised 83.5% of the market.
Bengaluru led in new completions with around 8.2 mn sq. ft., followed by Hyderabad with 7.6 mn sq. ft., setting a new high with consistent growth in new completions over the past decade. Mumbai recorded the highest rental growth of 10% YOY in the BKC micro-market due to limited availability of space.
“The Indian commercial real estate sector has demonstrated its remarkable resilience and adaptability in the face of changing market dynamics. Despite a decline in take-up, the IT sector continues to assert its dominance as the primary demand driver. The growth of co-working spaces reflects the evolving preferences of businesses, while the BFSI sector's remarkable year-on-year growth highlights its strong presence.” said Naveen Nandwani, Managing Director – Office Leasing Services, Savills India
“In the face of continuing global economic challenges, Indian commercial real estate appears to be coping relatively well in the subdued demand scenario. With a strong GDP growth rate, large talent pool, favourable policies, and ever-growing infrastructure, India continues to attract corporate interest. This should augur well for the office market in the long run. For now, though, the corporates will hope for a stable scenario for the next few quarters and eventual growth." said Arvind Nandan, Managing Director - Research and Consulting, Savills India.
