Office space absorption in India’s six major cities rose 16 per cent QoQ to 14 million sqft in the first quarter of 2023. However, the YoY gross absorption comparison indicates an 11 per cent decline owing to global economic pressures, according to the latest report by international real estate advisory firm Savills India. The six cities are Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai and Pune.
Additionally, the office space witnessed a 23 per cent QoQ increase in new supply infusion, which stood at 13.1 million sqft in Q1 2023. Meanwhile, flexible workspaces were the leading absorption driver for office spaces and accounted for 27 per cent of gross absorption for Q1 2023.
The report said total office stock across top-6 cities stands at 717.1 mn sq.ft. as on Q1 2023. Overall, India vacancy levels stood at 18.4 per cent in Q1 2023. Flex spaces gross absorption share stood highest at 27 per cent, followed by IT-BPM and BFSI sectors which accounted for 23 per cent and 16 per cent demand share respectively.
Savills India expects 2023 to witness gross absorption to the tune of 48.5 mn sqft. Meanwhile, annual supply infusion is expected to stand at 61.5 mn sqft by the year-end.
Citi-wise, Bengaluru, Delhi-NCR and Chennai together accounted for two-thirds of quarterly demand. Maximum supply infusion was witnessed in Hyderabad and Pune, with a cumulative share of over 50 per cent. Bengaluru witnessed leasing activity of around 3.9 mn sqft in Q1 2023, accounting for around 28 per cent of India’s gross absorption.
Chennai continued to remain at the top-3 cities list with respect to demand, with three-fourths of the city’s office demand coming from the micro-markets of PTR, MPR and Post Toll OMR.
Hyderabad witnessed leasing activity of around 1.8 mn sqft, corresponding to a strong YOY increase of 50 per cent, with stable rentals across micro-markets. In Mumbai, demand was driven by small and mid-sized deals with the BFSI sector continuing to drive office space take-up in the city.
In Pune, flexible workspaces continued to thrive in Q1 2023, with a 41 per cent share in demand.
Naveen Nandwani, managing director (commercial advisory and transactions) of Savills India, said, “While quarterly absorption has improved in Q1 2023, there is evidence of global headwinds and related pressures, as seen in 11 per cent annual decline in gross space absorption compared to Q1 2022. The bright spot, however, is the strong resurgence of Flex spaces, which has accounted for more than a quarter of the overall demand in the first quarter. The demand is expected to pick up in due course, but Q1 performance implies that estimates for full-year 2023 remain biased on the side of caution.”