July 20, 2023: Bangalore, Chennai and Hyderabad dominated office demand with the contribution of 59% of the total office leasing across the top seven cities during the April to June 2023 quarter, according to a report by Bangalore-based real estate consultant Vestian.
According to the quarterly office market report ‘The Connect Q2 2023’, the combined office leasing in three major southern cities was at 8.2 million square foot (msf) out of a total of 13.9 msf absorbed during the quarter.
Office leasing across seven major cities saw a 6% drop to 13.9 msf during the quarter as against 14.8 msf in the year-ago period owing to delays in decision-making by large domestic firms and MNCs amid global uncertainties. However, the demand was up 17% compared with the previous quarter.
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.
According to Rao, 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 stabilise, the second half of the year is expected to see increased real estate activities across the country,” he said.
Trends in April-June 2023 vs April-June 2022
Chennai witnessed an 83% rise in leasing to 2.2 msf from 1.2 msf. The leasing in Bangalore decreased 12% to 3.7 msf from 4.2 msf. Hyderabad saw a marginal fall of 4% to 2.3 msf from 2.4 msf.
In Maharashtra’s two major office markets, the leasing in Mumbai fell 25% to 1.8 msf from 2.4 msf. However, the demand in Pune was up 6% to 1.8 msf from 1.7 msf.
The office leasing in Delhi-NCR remained subdued and fell 5% to 2 msf from 2.1 msf. In Kolkata, the leasing activities plunged 88% to 0.1 msf from 0.8 msf.
The technology sector witnessed increased leasing activities, capturing the highest market share of 26% in the June quarter. On the other hand, the engineering and manufacturing sector accounted for 19% of the leasing activity; flexible spaces captured a respectable share of 18%, the report said.
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