South cities account for 57% of office demand in 2023 so far, pan-India leasing falls 4.5%: Colliers

South Indian cities account for 57 percent of office demand in calendar year 2023 so far, stated a report released on September 29 by real estate consultancy group Colliers, citing the data fetched from the six major commercial hubs of Delhi-NCR, Mumbai, Pune, Chennai, Bengaluru and Hyderabad.

The pan-India office space leasing, however, fell 4.5 percent in the first nine months of 2023 as compared to the corresponding period of the previous year, the report said.

While a total of 38 million square feet (msf) of office space has been leased in the first three quarters of this year, the number stood at 39.8 msf in the same period of 2022.

In the third quarter, a marginal on-year growth in leasing activity was recorded, as 13.2 msf of office space was absorbed as compared to 12.9 msf in the July-September period last year.

Exciting news! Mint is now on WhatsApp Channels. Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!

“Driven by tech-based occupiers, the southern office markets of Bengaluru, Hyderabad and Chennai continue to witness heightened leasing activity. The three cities accounted for bulk of the demand, with about 57 percent share in the first three quarters of 2023,” said Arpit Mehrotra, Managing Director, Office Services, South & Head of Flex, Colliers India.

“Although, Bengaluru will continue to dominate India leasing activity in 2023, Chennai and Hyderabad are likely to see greater demand acceleration in the last quarter of the year,” Mehrotra added.

Year-to-date, the office space leasing in Chennai stood at 6.3 msf, which is 75.7 percent higher as against 3.6 msf in the year-ago period. In Bengaluru, the office space absorption in the year so far stood at 5.2 msf, which is 9.8 percent higher from 4.8 msf in the year-ago period.

Bengaluru has topped the chart in terms of total office space absorption in 2023 so far at 10.1 msf, but the numbers are 21.3 percent lower as against 12.8 msf in the year-ago period.

Among other cities, Delhi-NCR recorded an office space leasing of 8.5 msf, which is 4.7 percent lower as compared to 8.9 msf in the corresponding period of the previous year. In Mumbai, the numbers came in at 4.4 msf, down 23.3 percent from 5.6 msf in the first nine months of 2022. In Pune, it dropped 13.3 percent to 3.6 msf from 4.1 msf in the year-ago period.

As per the Colliers report, the pan-India new supply of office space came in at 10.8 msf in Q3, higher by 17 percent as compared to 9.2 msf in the corresponding period of 2022. Year-to-date, however, it stood at 32.7 msf, down 1 percent from 33 msf in the same period of the previous year.

“While there is a healthy supply pipeline for the next few years, developers have been cautious of infusing supply in tandem with market demand dynamics. Vacancy levels since 2022 have been in the range of 15-20% across most cities, signaling stability in occupancy levels. Return to office mandates, despite increased preference for hybrid working augurs well for the near-term office space demand. Consequentially, rentals are likely to remain firm across key micro markets,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.