Office space absorption across India’s six major cities fell by 11 percent year-on-year, touching 14 million square feet (msf) in the first quarter of 2023, a report by Savills India said.
However, the absorption rate witnessed a record growth of 16 percent quarter-on-quarter and new supply infusion stood at 13.1 msf in Q1 2023, up 23 percent on-quarter.
The total office stock across the top six cities stood at 717.1 msf as of Q1 2023.
Overall India vacancy levels stood at 18.4 percent in the quarter.
Bengaluru, Delhi-NCR and Chennai together accounted for two-thirds of quarterly demand. Maximum supply infusion was witnessed in Hyderabad and Pune, with a combined share of over 50 percent.
Flexible workspaces were the leading absorption driver for office spaces and accounted for 27 percent of gross absorption for Q1 2023, the report added.
Bengaluru witnessed leasing activity of around 3.9 msf in Q1 2023, accounting for around 28 percent of India’s gross absorption.
Chennai remained the top city for demand, with three-fourths of the city’s office demand coming from the micro markets in the city.
Hyderabad witnessed leasing activity of around 1.8 msf, corresponding to a strong increase of 50 percent over the previous year, with stable rentals across micro markets.
In Mumbai, demand was driven by small and mid-sized deals with the banking, financial services and insurance sector continuing to drive office space take-up in the city.
Savills India expects 2023 to see gross absorption to the tune of 48.5 msf, and annual supply infusion to stand at 61.5 msf by the year's end.
“While quarterly absorption has improved in Q1 2023, there is evidence of global headwinds and related pressures, as seen in an 11 percent annual decline in gross space absorption compared to Q1 2022. The demand is expected to pick up in due course, but Q1 performance implies that estimates for full-year 2023 remain biased on the side of caution,” said Naveen Nandwani, managing director, commercial advisory and transactions, Savills India.