Indian Office Space Market Q3 2023
The Bengaluru office market remained slow in the third quarter (July-September) of the calendar year, as lease activity and demand-supply remained low. According to commercial real-estate expert Vestian, Hyderabad had a growth in all segments, propelling it to the top of the market.
According to the Vestian analysis, the top seven cities saw a 21% increase in office leasing and a 26% increase in new supply this year: Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Delhi-NCR, and Kolkata.
“In Q3 2023, the Indian office sector witnessed heightened real estate activities as absorption reached the highest level since the pandemic and new completions increased to a five-quarter high,” said Vestian CEO Shrinivas Rao.
Vestian also announced a 21% year-on-year increase in office space absorption in the third quarter to 15.9 million square feet across seven key office markets. During the third quarter, new office space supply increased by 26% year on year to 13.4 million square feet in the seven largest cities.
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Bengaluru, a major hub for information technology (IT) firms, has seen a considerable drop in leasing transactions. In Bengaluru, office space absorption declined 28% year on year to 3.6 million square feet during the July-September quarter. New commercial space supply was also down 25% year on year to 2.7 million square feet.
The rental of office space in Hyderabad increased by 270 percent to 3.7 million square feet. New supply increased 175% to 5.5 million square feet. In the same quarter, office lease deals in Chennai increased by 82% to 2 million square feet. The fresh supply increased by 71% to 1.2 million square feet.
During the same period, leasing of office space in Delhi-NCR declined 14% year on year to 3 million square feet. Furthermore, new office space supply fell 82% to 0.5 million square feet. In addition, the Kolkata commercial market had 0.2 million square feet of lease activity and 0.7 million square feet of new supply.
The leasing of office space in Mumbai increased by 21% to 2.3 million square feet, while new supply increased by 125% to 0.9 million square feet. Pune had an 83% increase in office leasing to 1.1 million square feet, as well as a 73% increase in new supply to 1.9 million square feet.
The sector also reported low vacancy rates and an increase in average rental rates. “This showcases the robust fundamentals of the sector and a healthy demand for quality office spaces in India,” Rao said in a statement.
According to the business, the primary office markets in Southern cities evolved and commanded the biggest proportion of pan-India absorption and new completions.
With a 25% share, the IT and ITeS (information technology-enabled services) industry dominated leasing over the period. In the third quarter of 2023, the BFSI sector accounted for 20% of total absorption. Furthermore, in Q3 2023, the manufacturing & engineering and flexible space sectors accounted for 17% and 16% of the total.
Vestian anticipates an increase in office demand in Bengaluru as large IT companies call their employees back to work. The business also anticipates that rents in these seven locations would skyrocket due to renewed demand as many huge companies call their employees back to work.
Indian Office Space Market Q3 2023
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Frequently Asked Questions
A1: Vestian’s analysis for Q3 2023 highlighted a 21% increase in office leasing and a 26% rise in new supply across the top seven cities in India. The report showcased contrasting trends, with Hyderabad experiencing growth while Bengaluru faced a decline in leasing transactions.
A2: Bengaluru witnessed a significant drop in leasing transactions with a 28% year-on-year decline in office space absorption to 3.6 million square feet. In contrast, Hyderabad saw impressive growth, with office space absorption increasing by 270% to 3.7 million square feet. New supply in Bengaluru was down 25%, while in Hyderabad, it increased by 175%.
A3: Chennai experienced an 82% increase in office lease deals to 2 million square feet, and Delhi-NCR reported a 14% year-on-year decline in office space leasing to 3 million square feet. Mumbai saw a 21% increase in office space leasing, while Pune had an 83% increase. Kolkata recorded 0.2 million square feet of lease activity and 0.7 million square feet of new supply.
A4: The IT and ITeS industry dominated office leasing with a 25% share, while the BFSI sector contributed 20%. Manufacturing & engineering and flexible space sectors accounted for 17% and 16%, respectively, of the total office space absorption during Q3 2023.
A5: Vestian anticipates a rise in office demand in Bengaluru as major IT companies call employees back to work. The business also predicts a surge in rents across the top seven cities due to renewed demand as large companies bring employees back to the office.
