Monday, 25 December 2023

Q4 propels record-high office leasing activity; at 58.2 msf 2023 witnesses 16% YoY growth in demand


·       Q4 2023 records 20.2 mn sq ft of gross absorption, highest ever quarterly leasing activity

·       Bengaluru drives 2023 demand with more than one-fourth share in gross leasing, followed by Delhi NCR & Chennai at around one-fifth share

·       Flex space leasing continues to grow, highest leasing in any year at 8.7 mn sq ft,

·       Large deals (>100,000 sq ft) accounted for 50% of 2023 demand; Space take-up by GCCs bounce back in Q4

·       50.1 mn sq ft of Grade A supply infusion in 2023 reflects strong developer confidence

·       Vacancy remained rangebound while rentals firmed slightly

Gurgaon, India, 24 December 2023: Contrary to initial beliefs, 2023 India office market has culminated on a spectacular note with 58.2 mn sq ft of gross absorption across the top 6 cities. The last quarter of the year witnessed the highest-ever demand for office spaces in India, with all the three southern cities of Bengaluru, Chennai and Hyderabad registering best performance since the Covid-19 pandemic. While Bengaluru and Delhi NCR drove leasing activity during 2023, accounting for about half of the total demand of office space in India, Chennai made it to the top three list for the first time. Furthermore, with more than 2x leasing activity in 2023 as compared to 2022, Chennai breached all earlier highs and recorded 10.5 mn sq ft of gross absorption.

Trends in Grade A gross absorption (in million sq feet)

 City

2023

2022

YoY change

Share of Q4

in 2023 gross absorption

Bengaluru

15.6

16.2

-4.2%

35%

Delhi-NCR

11.6

10.8

7.0%

27%

Chennai

10.5

4.6

131.0%

40%

Hyderabad

8

6.5

22.7%

34%

Mumbai

7

7.1

-1.2%

38%

Pune

5.5

5.1

8.9%

36%

 Pan India

58.2

50.3

15.7%

35%

Source: Colliers

Note- Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

Demand (msf)

 

 

Q4 2023

Q4 2022

YoY Change

Bengaluru

5.5

3.5

58%

Chennai

4.3

1

338%

Delhi NCR

3.1

1.9

61%

Hyderabad

2.7

1.7

57%

Mumbai

2.6

1.4

87%

Pune

2

1

100%

Pan India

20.2

10.5

92%

Note: Data pertains to Grade A buildings and Pan India includes cities mentioned above only

 

Top 5 deals- Q4 2023

 

Transaction

Quarter

Year

City

Occupier/Tenant

Industry

Area leased (sq.ft.)

Building Name

Micro market

Location

Q4

2023

Chennai

Bank of America

BFSI

1,100,000

DLF Downtown

OMR Zone 1

Taramani

Q4

2023

Bengaluru

Philips

Engineering & Manufacturing

655,681

Embassy Business Hub

North

Bellary Road

Q4

2023

Bengaluru

Wells Fargo

BFSI

650,000

Embassy Tech Village - 3B

ORR

ORR 1

Q4

2023

Bengaluru

Qualcomm

Engineering & Manufacturing

567,404

Bagmane Capital - Angkor East

ORR

ORR 1

Q4

2023

Chennai

Citi Bank

BFSI

503,525

DLF Cybercity

MPR

Manapakkam

 

Top 5 deals of 2023

Transaction

Quarter

Year

City

Occupier/Tenant

Industry

Area leased (sq.ft.)

Micro market

Location

Q4

2023

Chennai

Bank of America

BFSI

11,00,000

OMR Zone 1

Taramani

Q2

2023

Chennai

Shell

Engineering & Manufacturing

6,67,752

MPR

Porur

Q4

2023

Bengaluru

Philips

Engineering & Manufacturing

6,55,681

North

Bellary Road

Q4

2023

Bengaluru

Wells Fargo

BFSI

6,50,000

ORR

ORR 1

Q4

2023

Bengaluru

Qualcomm

Engineering & Manufacturing

5,67,404

ORR

Tech demand rationalizing amidst increasingly heterogeneous office space take-up

The contribution of tech sector in office leasing has been steadily decreasing from around 50% in 2020 to 25% in 2023. While demand emancipating from tech occupiers rationalized, the overall leasing activity continued to diversify. The sectoral contributions from BFSI and Engineering & Manufacturing sectors especially have almost doubled, increasing from 10-12% in 2020 to around 16-20% in 2023.  Interestingly, in 2023, leasing by Engineering and Manufacturing players (26% share) surpassed the demand emancipating from Technology firms (22% share) in the tech hub of Bengaluru.

Demand from Flex operators remained unabated; at 8.7 mn sq ft flex spaces uptake in 2023 was 24% higher as compared to 2022. Flex penetration in the Indian office market is expected to rise further in 2024, as developers are likely to adopt core plus flex strategy for decision making.

Demand Drivers 2023

Sector

Area leased

(mn sq ft)

YoY change

 Technology

14.3

-15%

 BFSI

                             11.2

64%

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