Office space leasing may fall 20% to 40 million sq ft this year across six cities: Report, ET RealEstate

August 26, 2023

NEW DELHI: Leasing of office space may fall by 20 per cent to 40 million square feet this calendar year across six major cities with corporates making a delay in taking decision regarding their expansion plan, according to Colliers India.

In its report ‘India office market – Changing winds’ released on Thursday, real estate consultant Colliers India has estimated that the gross leasing of office space at 40-45 million square feet in the 2023 calendar year as against 50.3 million square feet in the previous year.

During the first six months of this year, the gross leasing of office space stood at 24.7 million square feet. In the second half, it expects demand to be at 15.3-20.3 million square feet, lower than the first half.

Gross absorption does not include lease renewals, pre-commitments and deals where only a Letter of Intent has been signed.

Collier said that India’s office sector is expected to close stronger at 40-45 million square feet of gross leasing across the top six markets in 2023, perceptibly higher than predicted in March this year.

“Domestic office demand is holding up well, supported by resilient economic outlook in spite of the drag from weak external demand,” the consultant said.

The year started on a cautious note registering 10.1 million square feet of gross absorption in the first quarter, and then saw a relatively faster recovery in the second quarter. During April-June, the leasing stood at 14.6 million square feet, a growth of 46 per cent quarter-on-quarter.

Across six major cities, Colliers India has pegged the gross leasing of office space in Bengaluru at 12-14 million square feet, Delhi-NCR 9-11 million square feet and Chennai 7-9 million square feet.

In Hyderabad, Mumbai and Pune, the absorption of office space is likely to remain in the range of 4-6 million sq ft each.

The year 2023 is likely to see a robust supply aligned with the anticipated space uptake across major office markets, vacancy levels to be range-bound leading to a potential rental upside, the consultant said.

“Demand for flexible workspaces from corporates has been growing consistently even as the overall demand for office space remains subdued this year,” Bengaluru-based managed co-working space provider UrbanVault Co-founder Amal Mishra said.

Corporates are adopting flexible workspace in a big way, he said.

“To meet the demand of flexible office space from medium and large enterprises, co-working operators including us are expanding their business rapidly. As a result, the share of leasing by flex operators in the overall leasing of office space from developers and other landowners has reached around 20 per cent,” Mishra said.

He expects further growth in this segment considering the value proposition it offers to corporate clients in terms of flexibility.

  • Published On Aug 24, 2023 at 03:30 PM IST

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