Office leasing activity increased by 9% Y-o-Y and touched 12.6 million square foot (msf) during the January-March 2023 period on a pan-India basis, says CBRE South Asia’s latest report, CBRE India Office Figures Q1 2023. Bangalore, Delhi-NCR and Chennai accounted for 62% of the overall transaction activity during the quarter.
Development completions of about 11.6 msf were recorded in the quarter, an increase of 31% Y-o-Y. Bangalore, Delhi-NCR, Pune and Hyderabad led supply additions during the quarter, accounting for a cumulative share of nearly 82%.
According to the findings of the report, Mumbai recorded 1.6 msf of office space absorption in the quarter with BFSI (39%), technology (23%) and engineering & manufacturing (21%) being the key sectors driving absorption.
Further, the report highlighted that Mumbai office space absorption was driven by small-sized (less than 10,000 sqft) deals. Also, IT developments led the absorption with a 62% share, followed by non-IT (28%) and SEZ (10%) buildings.
Sector contribution
In contrast to the previous quarters, where technology corporations dominated leasing activity, BFSI firms and flexible space operators drove space take-up in the Jan-March quarter with a share of about 22% each. Technology corporations (20%), engineering & manufacturing companies (11%) and research, consulting & analytics organisations (10%) followed them. Medium- to large-sized deal closures by global capability centres of BFSI corporates, Indian banks and domestic flex operators dominated leasing activity in the March quarter indicating a divergence in office absorption trends compared to previous quarters.
The cumulative share of BFSI firms and flexible space operators grew from 20% in the October-December period of 2022 to 44% during January-March 2023 due to a significant increase in large-sized deal closures. Akin the previous quarter, domestic firms overtook American companies in terms of quarterly leasing, accounting for nearly half of the leasing activity in the quarter. This leasing activity was mainly led by flexible space operators, BFSI firms and technology corporates.
Deal size driving absorption
Small (less than 10,000 sqft) to medium-sized (10,000-50,000 sqft) transactions drove office space take-up in Q1 with a share of 84% – a marginal decrease on a Q-o-Q basis. Mumbai office space absorption was driven by small-sized deals.
The share of large-sized deals (greater than 100,000 sqft) in the quarter remained similar to the previous quarter at 6%.
Bangalore, followed by Delhi-NCR, Hyderabad and Chennai dominated large-sized deal closures while a few such deals were also reported in Pune.
Anshuman Magazine, chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE said, “Short-term macroeconomic pressure caused by monetary tightening, inflation, the anticipated slowdown in developed nations, and geopolitical difficulties might impact occupiers’ expansion plans and decision-making in 2023. However, the impact of these situations on the leasing decisions of multinational corporations has not yet been identified. Going forward, leasing activity could pick up, especially in the second half of 2023, as India will continue to be an attractive and affordable source of high-skilled talent which will lead to corporates looking at the country for business sustenance during this period globally.”
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