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2023: Local office market in India resilient despite global uncertainty



The first three quarters of 2023 saw 38 million sq ft of office space taken up in the top six cities, nearly matching the absorption during the same period in 2022, indicating strong momentum despite global uncertainty, as per a Colliers study.

The southern cities accounted for nearly 60% of office space demand in the first nine months of 2023.

Among the top six cities, Bengaluru and Delhi-NCR led the way, comprising half of India’s total office space demand. In the third quarter alone, leasing activity in the top six cities reached 13.2 million sq ft, slightly surpassing the average quarterly demand of 12.6 million sq ft since 2022.

“Contrary to earlier belief, India office demand for the first three quarters of 2023 has followed an overall trajectory almost similar to 2022. With strong domestic macroeconomic indicators backing the demand for office space, the momentum is likely to continue in the last quarter of the year. It would be interesting to see if 2023 could breach the historic high leasing activity of 2022,” said Peush Jain, managing director for office services in India at Colliers.

In the initial three quarters of 2023, demand for office space became more diverse, with flex, engineering & manufacturing, and BFSI (banking, financial services, and insurance) sectors playing substantial roles in space occupancy.

The technology sector still leads the way, accounting for 25% of year-to-date leasing. Meanwhile, flex spaces, engineering & manufacturing, and BFSI sectors have each witnessed notable sectoral growth, with gains of up to six percentage points (pp) each, according to the report.”Flexibility has become increasingly important, serving crucial functions across an organisation’s entire business value chain. It spans from cost-effective and hassle-free space design and utilisation to playing a pivotal role in shaping modern offices that support hybrid work models and return-to-work strategies,” said Shesh Rao Paplikar, founder and CEO of BHIVE Group.In 2023, amid global economic uncertainty, domestic occupiers constituted nearly half of the total office space occupancy. Although technology occupiers, both domestic and foreign, delayed their real estate decisions, domestic companies, particularly in engineering and manufacturing, BFSI, pharma & healthcare, and flex spaces increased their office space uptake across India’s top six cities.

“The Indian office market appears to be resilient, with activity in 2023 matching that of 2022. Developers are aligning supply with market demand, resulting in a stable vacancy rate of 15-20% in most cities. Despite the trend towards hybrid working, return-to-office mandates are expected to support near-term demand for office space, which could keep rental rates steady in key micro markets,” said Darshan Govindaraju, director of Vaishnavi Group.



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