 "office, real estate")
Bengaluru’s office market remained slow in Q3 (July-September) of the Calendar Year as leasing activity and demand-supply dipped. Hyderabad saw an increase in all segments, pushing it to the top of the market, according to commercial real-estate consultant Vestian.
The Vestian report revealed a 21 per cent growth in office leasing and 26 per cent increase in new supply this year across the top seven cities: Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Delhi-NCR, and Kolkata.
“In Q3 2023, the Indian office sector witnessed heightened real estate activities as absorption reached the highest level since pandemic and new completions increased to a five-quarter high,” said Shrinivas Rao, chief executive officer of Vestian.
Vestian also reported growth in the absorption of office space in the Q3 period by 21 per cent year-on-year to 15.9 million square feet across seven major office markets. The seven major cities cumulatively witnessed a surge in the new office space supply by 26 per cent annually to 13.4 million square feet during the third quarter.
Bengaluru, the hub for information technology (IT) companies, has shown a significant decline in leasing transactions. In Bengaluru, the absorption of office space fell 28 per cent year-on-year to 3.6 million square feet during the July-September quarter. The new supply for commercial spaces also declined 25 per cent year-on-year to 2.7 million square feet.
In Hyderabad, the leasing of office space jumped 270 per cent to 3.7 million square feet. New supply soared 175 per cent to 5.5 million square feet. In the same quarter, the leasing transactions of office space in Chennai rose 82 per cent to 2 million square feet. The new supply was up 71 per cent to 1.2 million square feet.
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Leasing of office space in Delhi-NCR also fell 14 per cent year-on-year to 3 million square feet during the period. In addition, new office space supply also plunged 82 per cent to 0.5 million square feet. Alongside, Kolkata commercial market saw 0.2 million square feet of leasing transactions and 0.7 million square feet of new supply.
Mumbai reported a jump in leasing of office space by 21 per cent to 2.3 million square feet as new supply jumped 125 per cent to 0.9 million square feet. Pune witnessed 83 per cent increase in office leasing to 1.1 million square feet, along with new supply hike of 73 per cent to 1.9 million square feet.
The sector also reported healthy vacancy levels with an appreciation in average rentals. "This showcases the robust fundamentals of the sector and a healthy demand for quality office spaces in India," said Rao.
The company also said that on the demand-supply front, the key office markets in Southern cities evolved and commanded the highest share of the pan-India absorption and new completions.
The IT and ITeS (information technology-enabled services) sector dominated leasing during the period with 25 per cent share. The BFSI sector accounted for 20 per cent of the total absorption in the third quarter of 2023. Moreover, manufacturing & engineering, and flexible space sectors accounted for 17 per cent and 16 per cent share, respectively in Q3 2023.
Vestian expects office demand in Bengaluru to rise with large IT companies calling their staff back to office. The firm also expects rentals to soar in these seven cities due to renewed demand as many large conglomerates are calling their employees back to the office.
