The last quarter of 2023 witnessed India’s highest-ever demand for office spaces, with three southern cities of Bengaluru, Chennai and Hyderabad registering their best performance since the Covid-19 pandemic.
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, according to a report by Colliers India.
Source: Colliers
“Indian commercial real estate and office markets will continue to witness steady interest from domestic as well as foreign-origin occupiers. Increased preference for a combination of core and flex real estate space, heightened activity in tier II markets, and next-gen offices with more sustainable elements will be the key themes for office markets in 2024.” said, Arpit Mehrotra, Managing Director, Head of Office services, Colliers India.
Tech demand rationalizing
The contribution of tech sector in office leasing has steadily decreased to just 25 per cent in 2023 from around 50 per cent in 2020. While demand emancipating from tech occupiers rationalized, the overall leasing activity continued to diversify. 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% share) surpassed the demand emancipating from Technology firms (22% share) in the tech hub of Bengaluru.
Also Read : Infosys dips 2% on termination of $1.5 bn multi-year deal with global firm
Demand from Flex operators remained unabated; at 8.7 mn sq ft flex spaces uptake in 2023 was 24% higher as compared to 2022. Flex penetration in the Indian office market is expected to rise further in 2024, as developers are likely to adopt core plus flex strategy for decision-making.
Resurgence in large deals
Rentals go up
With 50.1 mn sq ft. of new completions, fresh supply across the top six cities rose about 17 per cent on year, indicating higher developer confidence for near-term space uptake. While Bengaluru accounted for 35% of the new completions in 2023, Hyderabad followed in closely with almost 30% share at an India level. Given strong performance on both demand and supply side, vacancy levels remained rangebound. Average rentals meanwhile increased by up to 5% across most
Indian cities.
First Published: Dec 26 2023 | 8:29 AM IST