The fourth quarter of 2023 has propelled India's office leasing market to unprecedented heights, culminating in a record-breaking 58.2 million square feet of gross absorption, led by the peninsular India and Delhi NCR's office space demand. With over one-fourth share, Bengaluru dominated office space absorption, but Chennai surprised everyone with over 2x growth and a record 10.5 million sq ft uptake, landing it in the top 3 for the first time, according to a report by Colliers India.
Meanwhile, tech's contribution shrank by half, from 50 per cent in 2020 to 25 per cent in 2023, but overall demand held strong thanks to diversification. The sectoral contributions from BFSI and Engineering and manufacturing sectors especially have almost doubled, increasing from 10-12 per cent in 2020 to around 16-20 per cent in 2023. Interestingly, in 2023, leasing by Engineering and Manufacturing players (26 per cent share) surpassed the demand emancipating from Technology firms (22 per cent share) in the tech hub of Bengaluru.
Demand from Flex operators remained unabated; at 8.7 mn sq ft, the flex spaces uptake in 2023 was 24 per cent higher than in 2022. Flex penetration in the Indian office market is expected to rise further in 2024, as developers are likely to adopt a core plus flex strategy for decision-making.
Almost 40 per cent of the large deals in the top six cities have come from GCCs, particularly from the technology and BFSI sectors. Global Capability Centres (GCCs) typically have large space requirements, and they too resumed their expansionary activities with greater fervour towards the second half of 2023, especially in the fourth quarter.
