Commercial (office) leasing climbed by 9% Y-o-Y and hit 12.6 million sq ft during the Jan-Mar 2023 period, according to CBRE.
Bangalore, Delhi-NCR, and Chennai accounted for 62% of the entire transaction activity during the quarter.
Development completions of over 11.6 million sq. ft. were reported in Jan-Mar’23, an increase of 31% Y-o-Y. Bangalore, Delhi-NCR, Pune, and Hyderabad dominated supply increases during the quarter, accounting for a collective share of approximately 82%. The non-SEZ category led development completions with a share of roughly 88%, which increased from 82% during the same time in the previous year.
“Short-term macroeconomic pressure induced by monetary tightening, inflation, the predicted recession in developed countries, and geopolitical challenges can impair occupiers’ growth plans and decision-making in 2023. Nevertheless, the influence of these events on the leasing choices of international organizations has not yet been identified,” said Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE.
The research points out that approximately half of the newly completed projects during the current quarter were green-certified (LEED or IGBC), suggesting a significant focus on sustainability.
In contrast to the previous quarter, when Information Technology corporates dominated leasing activity, BFSI businesses, and flexible space operators led space take-up in the Jan-March quarter with a share of nearly 22% each.
“Going ahead, leasing activity might build up, particularly in the second half of 2023, as India will continue to be an attractive and inexpensive source of high-skilled manpower which would lead to corporates looking to the nation for business sustainability during this time globally,” added Magazine.
This was followed by technology corporates (20%), engineering & manufacturing enterprises (11%), and research, consulting & analytics groups (10%). Medium- to large-sized transactions closes by global capability centers of BFSI corporates, Indian banks, and local flex operators dominated lease activity in the Jan-Mar’23 period. This suggested a divergence in office absorption patterns compared to prior quarters.
The cumulative proportion of BFSI enterprises and flexible space operators expanded from 20% in Oct-Dec’22 to 44% during Jan-Mar’23 owing to a considerable increase in large-sized contract closing.
Similar to the previous quarter, domestic businesses outpaced American enterprises in terms of quarterly leasing, accounting for about half of the leasing activity in the Jan-Mar’23 quarter. This leasing activity was predominantly dominated by flexible space operators, BFSI corporations, and IT corporates.
Small- (less than 10,000 sq. ft.) to medium-sized (10,000 – 50,000 sq. ft.) transactions led to office space take-up in Jan-Mar’23 with a share of 84% – a small decline on a Q-o-Q basis. The percentage of large-sized transactions (more than 100,000 sq. ft.) in Jan-Mar’23 was identical to the previous quarter at 6%. Bangalore, followed by Delhi-NCR, Hyderabad, and Chennai, led large-sized transaction closings in Jan-Mar’23, although a few such agreements were also recorded in Pune.
“By prior patterns, Bangalore, Delhi-NCR, and Hyderabad are projected to continue to drive absorption, while Chennai, Mumbai, Pune, and Kolkata will also show healthy space take-up. Certain tier-II areas will also continue to draw corporates’ attention as the next growth destinations owing to increasing infrastructure and the existence of a significant talent pool,” said Ram Chandnani, Managing Director, Consulting & Transactions Services, CBRE India.
