July 7, 2023: Office leasing in Mumbai in the second quarter of 2023 (Q2 2023) stood at 1.3 million square foot (msf), according to the CBRE India Office Figures Q2 2023 report. Key sectors that drove absorption during April-June’23 included BFSI (31%), technology (28%) and engineering and manufacturing (13%). Key transactions recorded in Mumbai during the quarter were:
- Bajaj Electricals leased 61,000 sqft in One International Center – IV
- Infosys leased 56,900 sqft in Mindspace (West) Building 1 (Gigaplex)
- Piramal Finance leased 35,400 sqft in Agastya Corporate Park – Phase I
The report further highlighted that Mumbai office space absorption was driven by medium-sized (10,000 – 50,000 sqft) deals. Also, non-IT developments led the supply and absorption with 100% and 50% share respectively.
In Q2 2023, office leasing activity in pan-India reached 13.9 msf, up by 12% QoQ. Bangalore, Chennai and Pune led the absorption in these three months, accounting for about 59% of the transaction activity. During the quarter, technology companies witnessed an uptick in activity, accounting for 29% of the leasing, followed by flexible space operators (18%), engineering and manufacturing firms (17%) and BFSI corporates (17%). Leasing in the BFSI sector was driven by deal closures by global capability centres of BFSI corporates, Indian banks and insurance firms. Most of these corporations are focusing on expanding their footprint.
Total office space supply stood at 12.4 msf in Q2 2023, marking an increase of 6% QoQ. Hyderabad, Bangalore and Chennai led supply addition during the quarter, accounting for a cumulative share of 84%. The non-SEZ segment continued to dominate development completions, with SEZ supply accounting for 24% of the new developments. Moreover, 46% of the newly completed developments during the quarter were green-certified (LEED or IGBC).
Like the previous quarter, domestic firms continued to lead the absorption in Q2 2023 and H1 2023, accounting for a share of 43% and 46% respectively. This was mainly led by flexible space operators, technology corporations and BFSI firms.
Small-sized (less than 10,000 sqft) to medium-sized (10,000 – 50,000 sqft) transactions drove office space take-up in Q2 2023 with a share of 85%. The share of medium-sized deals increased to 54% in Q2 2023 from 48% in the Q1 2023. In Q2 2023, the share of large-sized deals (greater than 1,00,000 sqft) remained similar to Q1 2023 at 6%. Hyderabad dominated large-sized deal closures in Q2 2023, while a few such deals were also reported in Pune, Chennai, Bangalore and Delhi-NCR.
Anshuman Magazine, chairman and CEO – India, South-East Asia, Middle East and Africa, CBRE, said, “India is expected to be amongst the world’s fastest-growing economies amidst a likely weakening of global macroeconomic conditions. We believe that the share of domestic firms in leasing would also remain strong during the year; at the same time, their greater emphasis on return to offices (RTO) is also expected to boost their operations. Occupiers’ concerns regarding global macroeconomic headwinds would persist in the short term. Nonetheless, favourable demographics, a high-skilled and cost-effective talent pool, robust technology and startup ecosystems, availability of high-quality office spaces at sub-dollar rentals and beneficial government policies would continue to drive corporates’ real estate portfolio expansion in the medium to long term in India”.
Ram Chandnani, managing director, advisory and transactions services, CBRE India, said, “Occupiers continue to focus on bringing employees back to the office, even as hybrid working prevails across most sectors. Bangalore, Delhi-NCR, Chennai and Hyderabad are expected to drive absorption in 2023, while Mumbai, Pune and Kolkata would also witness robust space take-up. Some occupiers would also consider expanding to select Tier-II markets, owing to improving infrastructure, availability of skilled talent and attractive rentals. While technology firms would continue to drive leasing activity in India in 2023, demand is also expected to become more diversified, with growth likely across sectors such as BFSI, flexible space operators and engineering and manufacturing”.
During H1 2023, leasing activity in the office sector declined by 12% YoY to about 26.4 msf. Further, absorption during the first six months of 2023 was led by Bangalore, Chennai and Delhi-NCR, which together accounted for 60% of the leasing. Bangalore, Hyderabad and Delhi-NCR led supply addition in H1 2023 with a combined share of 68%. In H1 2023, about 24.2 msf of supply was recorded, marking a decline of 4% YoY.
During the first half of 2023, technology companies held the highest share in leasing activity at 24%, followed by BFSI firms at 20%, flexible space operators at 20% and engineering and manufacturing firms at 14%. Global multinationals accounted for about 63% of the total leasing by the technology sector during H1 2023.
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