The Indian office market is witnessing dynamic shifts in leasing trends, with Colliers’ latest report titled ‘Changing Winds’ projecting gross office leasing to reach approximately 40-45 million sq ft across the country’s top six markets in 2023. These markets include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune. Notably, the figures do not encompass lease renewals, pre-commitments, or deals that are at the letter of intent stage.
Bengaluru is expected to lead the pack with an estimated 12-14 million sq ft of gross absorption, while Delhi-NCR is anticipated to close at 9-11 million sq ft, Chennai at 7-9 million sq ft, and Hyderabad, Pune, and Mumbai ranging between 4-6 million sq ft each.
The technology sector has played a pivotal role in driving office space demand, accounting for a 24 percent share during H1 2023. Flex space and engineering/manufacturing sectors followed at 18 percent and 17 percent, respectively.
Vimal Nadar, Senior Director and Head of Research at Colliers India, noted that sectors like technology and BFSI (banking, financial services, and insurance) exhibited remarkable growth of over 50 percent quarter-over-quarter during Q2 2023. Additionally, demand from engineering and manufacturing surged twofold compared to the previous quarter. With improving occupier confidence, leasing momentum is predicted to sustain across critical demand sectors in the latter half of the year.
Despite external economic challenges, domestic office demand remains robust, fueled by a resilient economic outlook. The global economic forecast for 2023 displays marginal improvements in economies such as the US, the UK, and Europe compared to earlier estimates.
The year began cautiously with 10.1 million sq ft of gross absorption in Q1. However, Q2 showed a faster recovery, witnessing around 50 percent quarter-over-quarter growth with 14.6 million sq ft of leasing activity. The report attributed this growth to improved business sentiments, diverse demand segments, and an upswing in the domestic economy.
Positive macro-economic indicators, upward revisions in GDP forecasts by prominent economies, and sustained domestic economic momentum are expected to shape India’s office market outlook positively for 2023 and beyond.
With both demand and supply sides reflecting optimism, the Indian office market is poised for a stronger performance. H1 2023 saw the introduction of 22 million sq ft of new supply across the top six cities, marking a 31 percent increase in Q2 2023 compared to Q1. Colliers projects a 10-20 percent growth in supply during H2 2023 compared to the same period in 2022. This buoyant outlook is likely to exert upward pressure on rentals as occupancy rates rise.
Peush Jain, Managing Director, Office Services, India, Colliers, concluded that the positive momentum observed across economic indicators, coupled with supply and demand dynamics, sets the stage for a robust office market performance in 2023. The year is anticipated to culminate in gross leasing ranging between 40-45 million sq ft across the country’s top six cities.
