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Indian office sector records highest ever leasing and net absorption


Indian office sector soared to new heights in the fourth quarter of 2023, defying all odds and setting record-breaking highs in both gross lease volume (GLV) and net absorption, as per Cushman & Wakefield’s Q4 office data.

According to the report, GLV across the top eight cities in Q4 stood at a towering 27.4msf, an 84% growth than the previous quarter and a healthy 48% growth y-o-y. Not only is this the highest quarterly gross lease volume ever, but it also beats the previous record high the volume of Q4-2019 by a significant 4.5 msf margin.

More large deals gradually made a comeback after three-quarters of a quagmire as average deal sizes in Q4 jumped 37% as compared to the average deal sizes recorded in the last three quarters.

“With the record numbers in the fourth quarter of the year, the total leasing for 2023 now stands at a new annual peak of 74.7 msf, piping the 2022 GLV volume, which was a historic high, by about 4%. The active pipeline of deals currently suggests that this momentum in fresh space leasing is likely to continue over the next couple of quarters,” mentioned the report.

The report mentioned that the net absorption, which is a barometer of actual demand or expansion of occupied space in the market, recorded its highest volume ever at 18.6 mn sq ft across the top 8 cities for the quarter, a staggering 129% growth q-o-q and 106% growth on a y-o-y basis.

For the entire year, the net absorption stood at 41 msf, which is merely 2 msf less than the highest net absorption volume seen in the Indian office sector in 2019.Anshul Jain, Managing Director of India & South East Asia and Head of Asia Pacific Tenant Representation, said, “We have always maintained that the fundamentals of India’s office market are strong. While we anticipated a healthy performance this year despite global headwinds and economic uncertainties, Q4 and the entire year 2023 have exceeded even our most optimistic projections and turned out to be It’s the best one ever.“ A turnaround in the economic growth outlook for India in Q4, coupled with resilience seen in the global economy, could be a factor for fence-sitting occupiers to move ahead swiftly. These record-breaking numbers are a testament to the evolving needs of businesses and the increasing attractiveness of India’s office market. We anticipate a healthy and strong pipeline for India’s office sector in 2024 as well,” said Jain.

On a city level, Bengaluru accounted for over 40% of the country’s overall net absorption, with demand for fresh space driven by the E&M sector (30%), followed by IT-BPM (22%), professional services (13%) and flex space operators (9%). Chennai also witnessed record leasing, while Mumbai’s office continues to show good traction.

Veera Babu, Managing Director of Tenant representation (India), said, “ We have also seen a paradigm shift: the previously IT-BPM dominated landscape is now giving way to a much more diversified range of industries fuelling the office sector growth. A significant rise in the E&M and GCCs share in GLV is potentially indicating the office market’s response to a gradually diversifying economy.”

Looking at the sectors that majorly contributed to leasing volume in Q4, the market is seeing diversification with the share of the usually dominant IT-BPM sector being recorded merely at 20% in GLV, followed by engineering and manufacturing, BFSI, GCCs and Flex sector.

The full year saw 48 mn sq ft of new supply come into the market across top cities, which is short of 2.0 mn sq ft compared to the previous year. However, despite a large supply volume during the quarter, the vacancy rate for Grade-A offices remained unchanged at 18.4%, clearly indicating the influence of a healthy demand in the market.


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