Office space saw a 23% QoQ increase from the infusion of new supply across 6 major cities, which stood at 13.1 million square feet in Q1 2023.
Flexible workspaces were the top office space uptake driver and accounted for 27% of gross uptake in Q1 2023
Office space absorption in India’s six major cities increased by 16% QoQ to reach 14 million sq.ft. in the first quarter of 2023. However, comparing gross absorption YOY shows an 11% decline due to global economic pressures, according to the latest report from international property consultancy firm Savills India. The six cities are Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai and Pune.
Additionally, office space saw a 23% QoQ increase from the infusion of new supply, which stood at 13.1 million square feet in Q1 2023. Meanwhile, flexible workspaces were the primary driver of office space absorption and accounted for 27% of gross absorption for the first quarter. 2023.
The report indicates that the total office stock in the 6 largest cities is 717.1 million square feet. as in Q1 2023. Overall, vacancy levels in India stood at 18.4% in Q1 2023. Gross uptake share of flex spaces was highest at 27%, followed by the IT-BPM and BFSI sectors which accounted for 23% and 16% of demand. share respectively.
Savills India expects 2023 to witness gross uptake to the tune of 48.5 million square feet. Meanwhile, the annual supply infusion is expected to stand at 61.5 million square feet by the end of the year.
Citi-wise, Bengaluru, Delhi-NCR and Chennai together accounted for two-thirds of quarterly demand. The maximum infusion of supply was seen in Hyderabad and Pune, with a combined share of over 50%. Bengaluru saw rental activity of around 3.9 million square feet in the first quarter of 2023, accounting for around 28% of India’s gross uptake.
Chennai continued to be on the top 3 list of cities in terms of demand, with three quarters of the city’s office demand coming from the micro markets of PTR, MPR and Post Toll OMR.
Hyderabad saw rental activity of around 1.8 million square feet, corresponding to a strong increase of 50% year-on-year, with stable rents in micro-markets. In Mumbai, demand was driven by small to medium sized transactions with the BFSI sector which continues to drive office occupancy in the city.
In Pune, flexible workspaces continued to thrive in Q1 2023, with a 41% share of demand.
Naveen Nandwani, Managing Director (Business Advisory and Transactions) of Savills India, said: “While quarterly absorption improved in the first quarter of 2023, there is evidence of global headwinds and related pressures, as evidenced by the 11% year-on-year decline in gross space uptake compared to Q1 2022. The silver lining, however, is the strong resurgence of flex spaces, which accounted for more than a quarter of overall demand in the first quarter. Demand should pick up in due course, but the first quarter performance implies that estimates for the full year 2023 remain skewed on the side of caution.”
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