India’s three key southern cities — Bengaluru, Chennai and Hyderabad — dominated office demand with the contribution of 59 per cent of the total office leasing across the top 7 cities during the quarter ended June, according to Vestian.
Bengaluru-based real estate consultant Vestian released its quarterly office market report ‘The Connect Q2 2023’.
As per the data, the combined office leasing in three major southern cities stood at 8.2 million square feet, out of a total 13.9 million square feet absorbed in the April-June quarter of this calendar year.
Across seven major cities, office leasing fell 6 per cent to 13.9 million square feet during April-June as against 14.8 million square feet in the year-ago period due to delays in decision-making by large domestic firms and MNCs amid global uncertainties.
However, the demand was up 17 per cent compared with the previous quarter.
Commenting on the findings, Vestian CEO Shrinivas Rao said, “Despite global headwinds, the Indian economy has performed well. India’s GDP growth rate showed improvement in the last quarter of FY23. Financial markets also performed well, reflecting positive sentiment in the country.”
“Hiring intentions for Q3 2023 improved, indicating optimism about India’s growth prospects. The resilience of the Indian economy was reflected in the Indian office market as well, with increased absorption and a fading impact of funding challenges,” he said.
Rao noted that absorption and new completions increased significantly during the June quarter as compared to the previous quarter.
He highlighted that the technology sector dominated leasing activities, followed by engineering and manufacturing, while flexible spaces also gained traction due to cautious leasing decisions amidst market uncertainty.
“As global markets stabilize, the second half of the year is expected to see increased real estate activities across the country,” Rao said.
April-June 2023 vs April-June 2022:
Ø Chennai saw an 83 per cent rise in leasing to 2.2 million square feet from 1.2 million square feet.
Ø The leasing in Bengaluru decreased 12 per cent to 3.7 million square feet from 4.2 million square feet.
Ø Hyderabad witnessed a marginal fall of 4 per cent to 2.3 million square feet from 2.4 million square feet.
Ø In Maharashtra’s two major office markets, the leasing in Mumbai fell 25 per cent to 1.8 million square feet from 2.4 million square feet.
Ø But in Pune, the demand was up 6 per cent to 1.8 million square feet from 1.7 million square feet.
Ø The office leasing in Delhi-NCR remained subdued and fell 5 per cent to 2 million square feet from 2.1 million square feet.
Ø In Kolkata, the leasing activities plunged 88 per cent to 0.1 million square feet from 0.8 million square feet.
Ø The technology sector exhibits a commanding presence in leasing activities, capturing the highest market share of 26 per cent in the June quarter.
Ø While the engineering and manufacturing sector accounted for 19 per cent of the leasing activity, flexible spaces captured a respectable share of 18 per cent, the report said.
| Office Space Absorption | ||||||
| City | Q2 2023 | Q2 2022 | Q2 2023 vs Q2 2022 | H1 2023 | H1 2022 | H1 2023 vs H1 2022 |
| (% Change) | (% Change) | |||||
| Bengaluru | 3.7 | 4.2 | -12% | 7.0 | 7.7 | -9% |
| Chennai | 2.2 | 1.2 | 83% | 3.8 | 2.7 | 41% |
| Hyderabad | 2.3 | 2.4 | -4% | 3.8 | 4.4 | -14% |
| Mumbai | 1.8 | 2.4 | -25% | 3.0 | 3.6 | -17% |
| Kolkata | 0.1 | 0.8 | -88% | 0.5 | 1.0 | -55% |
| Pune | 1.8 | 1.7 | 6% | 3.3 | 3.4 | -3% |
| NCR | 2.0 | 2.1 | -5% | 4.4 | 4.3 | 2% |
| Total | 13.9 | 14.8 | -6% | 25.8 | 27.1 | -5% |
Source: Vestian Research
January-June (H1) 2023 vs January-June 2022:
Ø Office leasing across top cities fell 5 per cent to 25.8 million square feet from 27.1 million square feet.
Ø The South dominance was seen in the January-June period as well, with a share of the three south Indian cities at 57 per cent.
Ø The combined leasing in Bengaluru, Hyderabad and Chennai stood at 14.6 million square feet out of the total 25.8 million square feet across seven major cities during the January-June period.
Ø In Bengaluru, office absorption saw a decline of 9 per cent to 7 million square feet in January-June this year from 7.7 million square feet in the corresponding period of the previous year.
Ø The leasing of office space in Hyderabad fell 14 per cent to 3.8 million square feet during the first half of this year from 4.4 million square feet in the year-ago period.
Ø However, Chennai saw a 41 per cent rise in office space absorption to 3.8 million square feet in January-June 2023 from 2.7 million square feet in the corresponding period of the previous year.
Ø Among non-Southern cities, the office demand in Delhi-NCR increased but leasing activities remained subdued in Kolkata, Mumbai and Pune during the first half of the year.
Ø In Mumbai, office leasing declined 17 per cent to 3 million square feet from 3.6 million square feet.
Ø The absorption of office space in Pune was down marginally 3 per cent to 3.3 million square feet from 3.4 million square feet.
Ø In Kolkata, the leasing plunged 55 per cent to 0.5 million square feet in January-June from 1 million square feet.
About Vestian:
Vestian is an occupier-focused workplace solutions firm specializing in commercial, residential, industrial, retail and hospitality sectors. Headquartered at Chicago, Vestian has offices across US, India, China, UK, Sri Lanka and the Middle East. Our core strength lies in providing customized innovative solutions that are aligned to the client’s business objectives. Our extensive service portfolio includes Investment & Consultancy Services, Transaction Advisory Services, Project Services, Retail Business Solutions and Integrated Facilities Management Services. Vestian is the only global workplace solutions organization to be certified in both quality management systems and environmental health & safety standards such as ISO 9001, ISO 14001, ISO 45001 and ISO 37001. For further information on the company, you can visit us at www.vestian.com
