INDIA

OFFICE MARKET
REPORT - Q3 2023
CUSHMAN & WAKEFIELD INDIA RESEARCH

KEY HIGHLIGHTS

1 4
15.1 msf gross leasing volume (GLV) in Top 8 10.7 msf of new completions were recorded in
cities in Q3 2023; a 13% decline both on y-o-y Q3 2023 with Bengaluru accounting for ~30%
and q-o-q basis share, followed by Hyderabad (21%) and Pune
(15%). Supply declined by around 10% on a
q-o-q basis.

2
Mumbai was the leading market in terms of pan-

5
India gross leasing volumes in Q3, accounting Net absorption in Q3 2023 stood at 8.3 msf,
for a share of around 23%, followed by Delhi an increase of 32% on a quarterly basis and
NCR, Hyderabad and Bengaluru shares of 22%, comparable to quarterly average volumes seen
16% and 15% respectively. in 2022.

3
IT-BPM accounted for the highest share
(~31%%) in quarterly leasing, followed by BFSI
and engineering & manufacturing with 14% and
13% shares, respectively.

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Pan India gross lease volume witnessed a 13% fall after the
spike seen in Q2-23, largely owing to delayed decision-
making as occupiers tread a bit cautiously before
committing to large-sized transactions. Mumbai and
Delhi-NCR were the major contributors to GLV volume in
Q3 with 45% share, followed by the two leading IT cities
of Bengaluru and Hyderabad. Subsequently, the YTD-23
GLV volume stood at 48.2 msf, i.e. nearly 5 msf short of the
volume seen during the same period last year. Therefore,
for the full year 2023, we anticipate overall GLV volumes
to remain low compared to the historic high volumes seen
in 2022 in India.

A dominant 70% share of fresh leasing in the overall GLV

suggests that occupiers continue to have faith in the
outlook of Indian economy and real estate. While bigger
deals may have been slow to come-by, expansion plans
or smaller office deals are happening at satisfactory pace.
Besides, a rising rate of employees returning to office, as
also seen through the steep rise in residential rents across
most cities (especially along the prime office corridors),
could be an indication of large-sized deals commencing
soon.

Net absorption remained robust, almost comparable to

the quarterly average volumes recorded in 2022, at 8.3 msf
during the quarter. With a reasonably healthy fresh leasing
activity seen in the market, and also commencement of
projects that had moderate-to-healthy preleasing in it,
the net absorption number remained resilient. There is
anticipation that this trend could continue into the fourth
quarter as well, because developers fast-track projects
with better preleasing while speculative projects are
moving at a slower pace. New supply during the quarter
stood at 10.7 msf, a drop of 10% q-o-q, as some of the
speculative supply got pushed for later quarters when
demand is expected to revive. With a healthy supply
pipeline that is visible, we believe the rents will remain
largely range-bound across most micro-markets except
ones where the vacancy rate is very tight. We have been
observing relatively tight vacancies in prime Micromarkets
such as BKC, ORR, Guindy, Madhapur, and Viman Nagar,
and these markets could see marginal upward pressure
on rents.

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CUSHMAN & WAKEFIELD INDIA RESEARCH

LEASING TRENDS
GROSS LEASING ACTIVITY

Gross leasing volume stood at 15.1 msf as of Q3-23, which was nearly
Gross Leasing
13% lower, both on q-o-q as well as y-o-y basis. In the previous Q2 2023 Q3 2023 % Change
(msf)
quarter, GLV was recorded at 17.4 msf, which was comparable
to the quarterly average number that we witnessed in 2022 – a
Mumbai 2.73 3.47 26.90%
record year for Indian office real estate market. In comparison, the
year 2023 seems to be going a bit slow with average quarterly Delhi NCR 3.54 3.39 -4.10%
leasing volume of merely 16 msf. All components of the GLV, vis-à- Bengaluru 3.04 2.21 -27.10%
vis fresh leasing, term renewals and pre-commitments, witnessed
a fall relative to last quarter. Chennai 1.58 1.80 13.90%

Pune 3.12 0.97 -69.00%

Amongst the major metropolitan cities, Mumbai witnessed
strongest growth of 27% q-o-q in gross lease volumes. Chennai Hyderabad 2.65 2.44 -7.90%
and Kolkata too witnessed sharp growth in GLV on q-o-q basis
Kolkata 0.22 0.41 87.10%
during the quarter, while other cities saw a fall in GLV. Fresh leasing
fell by 13% on a q-o-q basis or near-about 8% on a y-o-y basis. As Ahmedabad 0.49 0.42 -14.10%
occupiers maintain a cautiously optimistic outlook on the Indian
economy and real estate sector, the interest level remains high but Q2 2022 Q3 2023
time required to close deals has also increased. -13.00%
17.37 msf 15.12 msf
Having said that, fresh leasing (~10.5 msf) continues to hold PA N I N D I A
dominant share in GLV of 69%, similar to shares it held in the
previous quarters, whereas term renewals and pre-commitments
shares stood at 19% and 12%, respectively. Hyderabad led the fresh Gross Leasing
Q3 2022 Q3 2023 % Change
leasing volumes in the quarter with a 21% share followed by Delhi (msf)
NCR and Bengaluru with 19% and 17% shares respectively. Rents
across most markets remain broadly stable amidst rising supply Mumbai 4.26 3.47 -18.60%
and a cautiously optimistic office demand outlook. Delhi NCR 3.82 3.39 -11.20%

Bengaluru 3.64 2.21 -39.20%

Chennai 1.94 1.80 -7.10%

Pan India GLV volumes witnessed a drop of 13% q-o-q in Q3
as some amount of caution has been exercised by occupiers i.e. Pune 1.66 0.97 -41.60%
leading to delays in decision-making over leasing of office spaces, Hyderabad 1.53 2.44 59.20%
particularly large-sized deals. Fresh leasing remains a dominant
portion of the overall GLV, and we believe this will continue to Kolkata 0.29 0.41 39.80%
remain healthy as more occupiers express their intention to call
employees back to office in full force. Amidst continued supply of Ahmedabad 0.23 0.42 79.70%
Grade-A spaces, rental growth remains muted, thereby helping
occupier-friendly conditions to prevail. Q3 2022 Q3 2023
-13.00%
17.38 msf 15.12 msf
PA N I N D I A

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TERM RENEWALS

Term renewals stood at around 2.8 msf in Q3, a 11% decline on

a qoq basis and a 10% fall as compared to the same period
last year. As a proportion of GLV, term renewals accounted
for 19% share, broadly unchanged from the shares seen in the
previous quarter as well as in same quarter last year. Stability
in rentals across major cities and confidence in the Indian
economy and business environment has led to occupiers
renewing their leases.
Renewals were highest in Mumbai, which accounted for nearly
two-thirds of pan India renewals, followed by Chennai with a 16%
share. Mumbai, Chennai and Delhi-NCR were cities that witnessed a
sharp-to-moderate rise in term renewals compared to the previous
quarter, while most other cities witnessed a fall.

PRELEASING ACTIVITY

Preleasing was recorded at 1.8 msf in Q3, accounting for nearly

12% of the quarter’s GLV, and witnessing a drop of 17% on a
q-o-q basis. The YTD-23 preleasing volume has been low at
4.3 msf, accounting for merely 50% of the prelease volume of
the full year 2022. This shows that occupiers are somewhat
cautious in committing to large space leasing through this
year, except for a brief period in Q2 when the US recession
and global inflation fears had significantly abated.
Amongst the top-8 cities, Delhi-NCR witnessed a healthy rise
in preleasing volume, followed by Chennai and Bengaluru
that also witnessed reasonable preleasing activity. With good
amount of Grade-A supply coming-up in the near future
across prime markets, we are expecting the prelease volumes
to turnaround and post a healthy rise in coming quarters.

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NET ABSORPTION

Owing to preleased new supply that became operational Net Absorption

Q2 2023 Q3 2023 % Change
during the quarter and also a healthy share of fresh demand for (msf)
office space, the Q3 net absorption volume was healthy at 8.3
msf, nearly 32% higher on a q-o-q basis. This was the highest Mumbai 0.52 1.15 120.70%
net absorption recorded in the first three quarters, equivalent
to the quarterly average net absorption volume seen in 2022. Delhi NCR 1.33 1.21 -9.20%
With that, the YTD-23 net absorption volume stood at 22.5 Bengaluru 0.56 1.79 218.30%
msf, approximately 2 msf lower than that recorded in the same
Chennai 0.93 0.59 -36.40%
period last year.
Pune 1.23 0.92 -25.40%
The lead IT cities of Hyderabad and Bengaluru contributed the
most to net absorption volumes, with shares of 22% each during Hyderabad 1.34 1.85 38.20%
the quarter. This was followed by the megacities of Delhi-NCR
Kolkata 0.19 0.34 79.60%
and Mumbai with shares of 15% and 14%, respectively. Except
Chennai and Pune, most cities witnessed a q-o-q rise in net Ahmedabad 0.17 0.42 145.30%
absorption volume in Q3.
Q2 2023 Q3 2023
31.80%
6.27 msf 8.27 msf
PA N I N D I A

Net Absorption
Q3 2022 Q3 2023 % Change
(msf)

Mumbai 1.03 1.15 11.40%

Delhi NCR 1.79 1.21 -32.40%

Bengaluru 3.29 1.79 -45.50%

Net absorption level stood the highest in Q3 during the YTD- Chennai 0.76 0.59 -22.10%
2023 period, largely owing to preleased buildings becoming
Pune 0.89 0.92 2.10%
operational and also a healthy share of fresh lease during
the quarter. This is despite an overall fall in the gross lease Hyderabad 1.59 1.85 16.60%
volume recorded during the quarter. Consequently, we saw a Kolkata 0.27 0.34 29.30%
marginal drop / stable vacancy rates across most cities during
the quarter. With a visible pipeline of quality projects coming Ahmedabad 0.23 0.42 79.70%
in prime submarkets across multiple cities, we believe the
net absorption of space should continue to post positively in Q3 2022 Q3 2023
-16.10%
coming quarters, also contributed by a sustained momentum
9.85 msf 8.27 msf
in fresh leasing of space.
PA N I N D I A

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OCCUPIER TREND
The fall in overall GLV volumes was mirrored across, with leasing volumes across sectors witnessing a drop on q-o-q basis.
Particularly, the e-commerce, E&M and telecom & media sectors witnessed sharp drop in volumes during the quarter, whereas
sectors such as IT-BPM, BFSI, Captives (GCCs) or Health-Pharma witnessed limited fall. Yet again, the IT-BPM sector stood
dominant with over 30% share in Q3 leasing volume, maintaining a similar share from previous two quarters. This was followed
by the BFSI and E&M sectors, which accounted for 13-14% share each.
Within the IT-BPM space that recorded leasing volume of 4.7 msf, Delhi-NCR recorded bulk (28%) of the share, followed by
Bengaluru and Chennai with 19% share each. Within the BFSI space that saw 2.2 msf of GLV during Q3, Mumbai took the
dominant share of 39%, followed by Delhi-NCR with 16% share in leasing. Flex space operators were relatively less aggressive
in Q3, recording 1.6 msf of GLV, with major action noticeable in cities such as Hyderabad and Pune. In the E&M space, Delhi-
NCR, along with Mumbai and Bengaluru collectively accounted for ~60% of the overall leasing volume.
In Q3, total flex seats leased stood at around 37,000 across the top-8 cities, including the ones that occupy in prominent
sub-Grade A assets. Consequently, the YTD flex seats take-up stood at 110,000 seats, maintaining the strong growth trend
witnessed in the post Covid period. Flex seats take-up is expected to remain strong in the near term due to a growing
preference for managed office spaces.

IT – BPM HEALTHCARE & PHARMA

4.41 5.36 4.73 0.47 0.59 0.50

BFSI CAPTIVE

2.59 2.49 2.17 0.54 0.45 0.41

ENGINEERING & MANUFACTURING TELECOM & MEDIA

2.58 3.27 2.01 0.32 0.44 0.28

FLEXIBLE WORKSPACE E-COMMERCE

2.56 2.28 1.56 0.19 0.08 0.02

PROFESSIONAL SERVICES OTHERS

2.12 1.52 1.26 1.59 0.89 2.17

Q3 2022 Q2 2023 Q3 2023 All values in MSF

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SUPPLY TRENDS
At 10.7 msf, new completions recorded a decline of 9% q-o-q while it posted a 31% drop on y-o-y basis. YTD-23 new completions
now stand at 29.5 msf as against the same period last year when 42.5 msf of new supply had hit the market. With large-sized deals
taking more time to conclude, developers may have been going slow on completions. Consequently, some of the supply which
was anticipated to come earlier this year has been pushed for later quarters across multiple cities. Projects with better preleasing
would be fast-tracked while the speculative supply may see slower progress if the on-going macroeconomic uncertainty persists
for some more time.
Close to 3.2 msf of new supply happened in Bengaluru, which accounted for a dominant 30% of all supply pan-India during the
quarter. This was followed by Hyderabad with 2.2 msf of new supply that hit the market in Q3, accounting for 21% share. Pune and
Chennai were other large contributors to new supply in Q3 with shares of 15% and 13%, respectively.
Going forward, the supply pipeline remains strong in India across many cities, particularly in the leading IT cities of Bengaluru and
Hyderabad. The good part is that bulk of the new supply is concentrated around the top-2 prime submarkets across cities, where
vacancy levels is high and occupier as well as investor interest levels are high. A healthy supply pipeline is likely to ensure rents
remain range-bound across most micro-markets, while select locations and projects where vacancies are very tight could see
upward pressure on rents. For instance, Micromarkets such as BKC, ORR, Guindy, Madhapur and Viman Nagar are prime markets
in their respective cities and there is a tight vacancy that prevails here.

New Supply New Supply

Q2 2023 Q3 2023 % Change Q2 2022 Q2 2023 % Change
(msf) (msf)

Mumbai 0.44 0.59 33.25% Mumbai 1.49 0.59 -60.42%

Delhi NCR 0.00 0.43 NA Delhi NCR 3.56 0.43 -87.95%

Bengaluru 2.63 3.22 22.47% Bengaluru 3.62 3.22 -11.12%

Chennai 2.08 1.35 -35.19% Chennai 1.15 1.35 16.94%

Pune 0.65 1.65 153.54% Pune 0.40 1.65 310.49%

Hyderabad 5.29 2.20 -58.41% Hyderabad 4.38 2.20 -49.62%

Kolkata 0.00 1.02 NA Kolkata 0.00 1.02 NA

Ahmedabad 0.63 0.22 -65.70% Ahmedabad 0.92 0.22 -76.48%

Q2 2023 Q3 2023 Q3 2022 Q3 2023

-9.00% -31.23%
11.74 msf 10.68 msf 15.53 msf 10.68 msf
PA N I N D I A PA N I N D I A

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OUTLOOK
In Q3, the GLV volumes stood a bit low compared to the previous quarter, broadly signalling a sustained cautious approach by
potential occupiers of large-sized offices. The overall dip in volume was reflecting across most cities that we track as well as across
tenant categories. However, the underlying market fundamentals remain strong as more companies have been calling for employees
to return to office in full strength. The residential supply crunch across major cities of Bengaluru, Hyderabad, Gurgaon, and Mumbai
suggests that employees have been returning to their base office locations as rentals of residential units have witnessed steep rise
along the prime office corridors. Therefore, we believe, it is probably a matter of time when macroeconomic scenario turns a tad more
favourable, and the current requirement of office space will translate into actual concluding of deals.
In the early months of Q3, the uncertainty surrounding the US economic recession abated significantly, although there is some continued
fears over rising inflation and sticky interest rates at higher levels across some countries. Back home in India, all the macroeconomic
data suggests robust economic momentum, as also the inflation data that has subsided in recent months. Indian office market is also
gearing-up for a foreseeable widespread adoption of ESG-compliant offices by leading occupiers, with nearly a quarter of Grade-A
office stock already LEED certified, while the remaining ones are actively working towards acquiring green certifications. Very soon, the
market will start assigning a premium to such office that offer ESG compliance, as well as better amenities and flexibility to its tenants.
Healthy traction on leasing volumes can be expected in the near future as the macroeconomic uncertainty abates and occupier
sentiment turns positive. With Indian economy growing at the fastest pace in the world, the interest level among IT-BPM, GCCs, and
manufacturing companies is high, and this inherent demand is likely to ensure a positive momentum in the near future.

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BUSINESSS CONTACT

VEERA BABU
Managing Director, Tenant Representation, India
[email protected]

FOR FURTHER INFORMATION, PLEASE CONTACT

AWANTIKA MOHANTY
Head of Business Development Services, Singapore,
SE Asia and India
[email protected]

SUVISHESH VALSAN
Director, Research Services, India
[email protected]

About Cushman & Wakefield

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