Demand for office spaces increased 92 percent between the December quarter across six mega Indian cities due to a high need for workspace from corporates and coworking operators, according to a study by Colliers India.
However, in the first nine months of 2023, the demand for office space in the top six Indian cities dropped 4.5 percent to 38 million square feet from 39.8 million square feet in the same period last year.
Real estate consultant Colliers India’s report shows that gross leasing of office space was 20.2 million square feet in the culminating months of 2023, almost doubling from 10.5 million square feet during the same period last year.
All thanks to strong demand from corporates, the total leasing of office space rocketed 16 percent to 58.2 million square feet in 2023 from 50.3 million square feet in 2022.
Interestingly, the demand drivers this quarter were engineering and manufacturing players, whereas, till September, the IT sector dominated real estate leasing.
Colliers traces demand and supply for office spaces in 6 cities — Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.
Gross leasing or absorption strips out lease renewals, pre-commitments, and deals bearing only single-time signed letters of intent.
City-Wise Demand:
Bengaluru: The office space leasing spiraled 58 percent to 5.5 million square feet during the October-December period from 3.5 million square feet a year ago.
Chennai: The office space leases saw a 4x increase from 1 million square feet to 4.3 million square feet.
Delhi-NCR: The demand for office spaces snowballed 61 percent to 3.1 million square feet this quarter from 1.9 million square feet a year ago.
Hyderabad: The gross leasing of office space rose 57 percent year-on-year to 2.7 million square feet from 1.7 million square feet.
Mumbai: Demand for office spaces grew more than three-fourths to 2.6 million square feet during Oct-Dec quarter from 1.4 million square feet.
Pune: Office space demand grew to 2 million square feet during the October-December period from 1 million square feet last year.
Arpit Mehrotra, Managing Director, Head of Office Services, Colliers India, said, “The Indian office market not only navigated initial uncertainties but exceeded expectations and emerged successfully, recording an impressive 58 million sq ft of gross absorption during 2023.”
The demand momentum cut way for an optimistic start to 2024.
“Notwithstanding unforeseen events, a stable economic outlook augurs well for Indian commercial real estate, and office markets will continue to witness steady interest from domestic as well as foreign-origin occupiers,” Mehrotra said.
Sector-Wise Contributors:
Colliers India showed the tech sector contribution to office leasing cut by half in 2023 from 2020.
However, BFSI and Engineering & Manufacturing sectors almost doubled, rising from 10-12 percent in 2020 to around 16-20 percent in 2023.
Leasing by engineering and manufacturing players representing 26 percent share outshone technology firms having 22 percent share in the tech hub of Bengaluru.
Demand from flexible space operators increased almost a quarter to 8.7 million sq ft in 2023.