Office space absorption dips 3% in Q1 2024
Bangalore led office leasing activity, followed by Delhi NCR and Hyderabad – together account 65% of the total leasing activity in India
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The office sector in India witnessed a decline of 3 per cent year-on-year (Y-o-Y) in gross absorption at 14.4 million sq ft during January-March quarter (Q1) 2024 across nine cities, says a report of real estate consulting firm CBRE South Asia Pvt Ltd.
According to ‘CBRE India Office Figures Q1 2024’ report, the office space development completions also declined 10 per cent Y-o-Y at 9.8 million sq ft was recorded in Jan-Mar‘24,). The non-SEZ segment dominated development completions with a share of 90 per cent, compared to 88 per cent during the same period in the previous year.
Further, Bangalore led office leasing activity, followed by Delhi NCR and Hyderabad. Together, the three cities together accounted for 65 per cent of the total leasing activity. Nearly half of the leasing during the quarter was led by expansionary initiatives by corporates across the top cities.
The Q1 of 2024 period saw technology companies leading with highest share in leasing activity at 26 per cent, followed by flexible space operators at 22 per cent. Engineering and manufacturing (E&M), and banking, financial services, and insurance (BFSI) firms were the other prominent drivers accounting for 13 per cent and 12 per cent, respectively.
Similar to the last quarter, domestic firms dominated quarterly leasing with a share of 48 per cent in Q1 of 2024, primarily led by flexible space operators, technology firms and BFSI corporates. In technology sector, the space take up was led by software & services with 95 per cent share. The cumulative share of technology companies and flexible space operators increased to 48 per cent during the review quarter compared to 32 per cent in the preceding quarter.
Global Capability Centres (GCCs) accounted for a share of one-third in the overall India office leasing in Q1. Within the GCCs space take-up, E&M companies contributed to over one-fourth share, followed by automobile firms.
Bangalore led the chart for GCC leasing, boasting a 60 per cent share, followed by Hyderabad with 26 per cent and Delhi-NCR with 9 per cent. Notably, 38 per cent of the large-sized deals (exceeding 100,000 sq. ft.) were secured by GCCs during this period, underscoring their significant impact on the office leasing landscape.
Office space take-up was dominated by small- (less than 10,000 sq. ft.) to medium-sized (10,000 – 50,000 sq ft) transactions in Q1 2024 with a share of 81 per cent. The share of large-sized deals (greater than 100,000 sq ft) in Q1 2024 increased to 8 per cent from 5 per cent during the same period in the previous year. Bangalore and Hyderabad dominated large-sized deal closures in Q1’24, followed by Delhi-NCR and Chennai, while a few such deals were also reported in Kochi, Mumbai, and Pune.
Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, said, “In 2023, the Indian economy continued its growth journey despite rising interest rates and global macroeconomic challenges. This trend of Indian resilience is expected to persist in 2024 with a continued focus on infrastructure development, private investments, and ongoing reforms.
The office sector witnessed meaningful gains in 2023, enhanced by a resurgence in occupiers’ sentiments and pent-up demand after a rise in return-to-offices. During 2024, occupiers would prioritise high-quality office space as they continue to facilitate portfolio expansion and consolidation. India's inherent advantages, such as its skilled workforce and well-established business ecosystem, continue to hold appeal, leading to a positive outlook for the office sector.”
