During the July-September period, the office market in Bengaluru experienced a decline in both gross leasing of workspace, down by 28 percent, and new supply, which decreased by 25 percent year-on-year.
This information comes from a recent report by real estate consultant Vestian, covering India’s top seven cities for the third quarter of the current calendar year. In Bengaluru specifically, office space absorption fell by 28 percent to 3.6 million square feet in the third quarter of 2023, compared to 5 million square feet in the same period the previous year. Similarly, new office supply in Bengaluru decreased by 25 percent year-on-year to 2.7 million square feet. Vestian anticipates a rise in office demand in Bengaluru as major IT companies opt to bring their staff back to the office.
Strong Growth and Activity Surge in Indian Office Sector: Vestian’s Q3 2023 Report
Across all seven cities, Vestian’s data indicates a 21 percent increase in gross office space leasing, reaching 15.9 million square feet in July-September this year, compared to 13.11 million square feet in the corresponding period last year. Apart from Bengaluru, the other significant cities covered in the report are Delhi-NCR, Mumbai, Chennai, Kolkata, Pune, and Hyderabad. New office supply across these cities saw a 26 percent increase to 13.4 million square feet during the reviewed quarter.
Shrinivas Rao, CEO of Vestian, commented on the report, noting heightened real estate activities in the Indian office sector during Q3 2023. He highlighted the highest absorption levels since the pandemic and an increase in new completions over the past five quarters. The office market reported healthy vacancy levels, with average rentals appreciating, signaling robust fundamentals and a strong demand for quality office spaces in India.
City-by-City Dynamics: Office Leasing Trends and Sector Insights from Vestian’s Q3 2023 Report
The data from Vestian further reveals a 14 percent decline in gross leasing of office space in Delhi-NCR, reaching 3 million square feet in July-September, compared to 3.5 million square feet in the same period last year. New office space supply in NCR witnessed a substantial 82 percent drop to 0.5 million square feet. In Chennai, leasing transactions for office space increased by 82 percent to 2 million square feet, while new supply rose by 71 percent to 1.2 million square feet. Hyderabad experienced a nearly four-fold increase in office space leasing, reaching 3.7 million square feet, with new supply surging by 175 percent to 5.5 million square feet.
In Mumbai, office space leasing rose by 21 percent to 2.3 million square feet, and new supply jumped by 125 percent to 0.9 million square feet. Pune witnessed an 83 percent increase in office leasing, reaching 1.1 million square feet, while new supply rose by 73 percent to 1.9 million square feet. Kolkata saw an increase in office space leasing to 0.2 million square feet during July-September, compared to 0.01 million square feet in the year-ago period. The new supply in Kolkata stood at 0.7 million square feet.
Regarding the demand-supply trend, Rao highlighted the evolution of key office markets in southern cities, which commanded the highest share of pan-India absorption and new completions. He predicted a rise in rentals in these cities due to renewed demand as many large conglomerates call their employees back to the office.
The report also highlighted sector-wise trends, with the IT-ITeS sector dominating leasing during the July-September period, accounting for 25 percent of the total absorption. The BFSI sector contributed 20 percent to the total absorption in the third quarter of 2023. Additionally, the Manufacturing & Engineering and Flexible Space sectors accounted for 17 percent and 16 percent shares, respectively, in Q3 2023.
