Due to the subdued sentiment in the office market during the first half of the year, it is estimated that the current calendar year will conclude with office demand or absorption of 55–57 million square feet, which is much less than the 70 million square feet observed last year but more than previously projected.
Office demand was 42 msf in the first nine months of this year, and the fourth quarter is expected to add 13–15 msf, according to research by CRE Matrix and industry group Confederation of Real Estate Developers’ Associations of India.
Following a quiet start to the year, leasing activity surged in the third quarter as supply increased by 35% and demand increased by 29% sequentially. In absolute terms, the supply was about 40 msf in the year’s first nine months.
The vacancy figures, which have increased since the middle of last year, indicate the uncertainty surrounding office take-up. The percentage of vacancies increased to 17.4% in the third quarter of 2023 from 16.9% in the same period the previous year. Bengaluru had the fewest vacancies at 8.3%, while Hyderabad had the most at 25.7%.
The demand for offices has reached 42 million square feet in the first nine months of this year, with roughly a quarter coming from Bengaluru and roughly a fifth from Delhi-NCR. Even with significant challenges, the information technology industry accounted for around two thirds of the demand for office space.
The overall Grade A stock is currently at 770 msf on a pan-India basis, and another 257 msf under construction will take another three years to enter the market.
Approximately half of the overall demand and 57% of the total supply in the third quarter came from Bengaluru and Hyderabad.
Key highlights of this quarterly pan India office report by CRE Matrix:
Pune, Noida, Hyderabad, and Thane are just a few of the vibrant Indian cities whose market rentals have experienced a significant double-digit increase. This indicates that occupiers are becoming more inclined to invest in premium premises inside more affordable office markets. Meanwhile, Delhi-NCR and MMR have experienced a decline in vacancies, contributing to an overall positive market trend. The first three-quarters of CY’23 witnessed a robust office demand of 42 million square feet, with Bengaluru and Delhi-NCR contributing significantly at 25% and 20%, respectively. Projections for the entire CY’23, as per a report by CREDAI in association with CRE Matrix, suggest a prospective conclusion with office demand ranging from 55-57 million square feet. Notably, Grade A/A+ workspaces saw a remarkable 29% increase in demand in Q3 CY’23 compared to Q2 CY’23. This heightened demand was largely propelled by key sectors like IT/ITeS, BFSI, and Co-working, which collectively steered two-thirds of the nationwide office demand in 2023.
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