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In the fourth quarter of 2023, the Indian office market saw 58.2 million square feet of gross absorption across the top six cities, representing a 16 per cent y-o-y growth in demand, states Colliers India.
While the contribution of the tech sector to office leasing continues to decline, from around 50 per cent in 2020 to 25 per cent in 2023, overall leasing activity continued to diversify. The sectoral contributions from BFSI and engineering and manufacturing sectors have almost doubled, increasing from 10-12 per cent in 2020 to around 16-20 per cent in 2023.
In addition, demand from flex operators stood at 8.7 million square feet, marking a 24 per cent growth compared to 2022. Moreover, flex penetration in the Indian office market is expected to rise further in 2024 as developers are likely to adopt a core plus flex strategy for decision-making.
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The last quarter of the year witnessed the highest-ever demand for office spaces in India, with all three southern cities of Bengaluru, Chennai, and Hyderabad registering the best performance since the Covid-19 pandemic, said the report.
While Bengaluru and Delhi NCR drove leasing activity during 2023, accounting for about half of the total demand for 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 compared to 2022, Chennai breached all earlier highs and recorded 10.5 mn sq ft of gross absorption.
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The demand momentum, particularly as seen during the last quarter, will pave the way for an optimistic start to 2024. “Moreover, increased preference for a combination of core and flex real estate spaces, heightened activity in Tier II markets, and next-generation offices with more sustainable elements will be the key themes for office markets in 2024,” noted Arpit Mehrotra, Managing Director, Head of Office Services, Colliers India.
Even large transactions with around 30 million square feet saw a 24 per cent increase. Global Capability Centers (GCCs), which typically have large space requirements, have resumed their expansionary activities with greater fervor towards the second half of 2023, especially in the fourth quarter. Almost 40 per cent of the large deals in the top six cities have come from GCCs, particularly from the technology and BFSI sectors.
With 50.1 million square feet of new completions, fresh supply across the top six cities rose about 17 per cent y-o-y, indicating higher developer confidence for near-term space uptake.