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Q4 propels record-high office leasing activity; at 58.2 msf 2023 witnesses 16% YoY growth in demand

Q4 2023 records 20.2 mn sq ft of gross absorption, highest ever quarterly leasing activity

  • Bengaluru drives 2023 demand with more than one-fourth share in gross leasing, followed by Delhi NCR & Chennai at around one-fifth share
  • Flex space leasing continues to grow, highest leasing in any year at 8.7 mn sq ft,
  • Large deals (>100,000 sq ft) accounted for 50% of 2023 demand; Space take-up by GCCs bounce back in Q4
  • 50.1 mn sq ft of Grade A supply infusion in 2023 reflects strong developer confidence
  • Vacancy remained rangebound while rentals firmed slightly

Gurgaon, India, 24 December 2023: Contrary to initial beliefs, 2023 India office market has culminated on a spectacular note with 58.2 mn sq ft of gross absorption across the top 6 cities. The last quarter of the year witnessed the highest-ever demand for office spaces in India, with all the three southern cities of Bengaluru, Chennai and Hyderabad registering best performance since the Covid-19 pandemic. While Bengaluru and Delhi NCR drove leasing activity during 2023, accounting for about half of the total demand of office space in India, Chennai made it to the top three list for the first time. Furthermore, with more than 2x leasing activity in 2023 as compared to 2022, Chennai breached all earlier highs and recorded 10.5 mn sq ft of gross absorption.

Trends in Grade A gross absorption (in million sq feet)

 City 2023 2022 YoY change Share of Q4

in 2023 gross absorption

Bengaluru 15.6 16.2 -4.2% 35%
Delhi-NCR 11.6 10.8 7.0% 27%
Chennai 10.5 4.6 131.0% 40%
Hyderabad 8 6.5 22.7% 34%
Mumbai 7 7.1 -1.2% 38%
Pune 5.5 5.1 8.9% 36%
 Pan India 58.2 50.3 15.7% 35%

Source: Colliers

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

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

Demand (msf)  
  Q4 2023 Q4 2022 YoY Change
Bengaluru 5.5 3.5 58%
Chennai 4.3 1 338%
Delhi NCR 3.1 1.9 61%
Hyderabad 2.7 1.7 57%
Mumbai 2.6 1.4 87%
Pune 2 1 100%
Pan India 20.2 10.5 92%

Note: Data pertains to Grade A buildings and Pan India includes cities mentioned above only

Top 5 deals- Q4 2023

Transaction

Quarter

Year City Occupier/Tenant Industry Area leased (sq.ft.) Building Name Micro market Location
Q4 2023 Chennai Bank of America BFSI 1,100,000 DLF Downtown OMR Zone 1 Taramani
Q4 2023 Bengaluru Philips Engineering & Manufacturing 655,681 Embassy Business Hub North Bellary Road
Q4 2023 Bengaluru Wells Fargo BFSI 650,000 Embassy Tech Village – 3B ORR ORR 1
Q4 2023 Bengaluru Qualcomm Engineering & Manufacturing 567,404 Bagmane Capital – Angkor East ORR ORR 1
Q4 2023 Chennai Citi Bank BFSI 503,525 DLF Cybercity MPR Manapakkam

Top 5 deals of 2023

Transaction

Quarter

Year City Occupier/Tenant Industry Area leased (sq.ft.) Micro market Location
Q4 2023 Chennai Bank of America BFSI 11,00,000 OMR Zone 1 Taramani
Q2 2023 Chennai Shell Engineering & Manufacturing 6,67,752 MPR Porur
Q4 2023 Bengaluru Philips Engineering & Manufacturing 6,55,681 North Bellary Road
Q4 2023 Bengaluru Wells Fargo BFSI 6,50,000 ORR ORR 1
Q4 2023 Bengaluru Qualcomm Engineering & Manufacturing 5,67,404 ORR

Tech demand rationalizing amidst increasingly heterogeneous office space take-up

The contribution of tech sector in office leasing has been steadily decreasing from around 50% in 2020 to 25% in 2023. While demand emancipating from tech occupiers rationalized, the overall leasing activity continued to diversify. The sectoral contributions from BFSI and Engineering & Manufacturing sectors especially have almost doubled, increasing from 10-12% in 2020 to around 16-20% in 2023.  Interestingly, in 2023, leasing by Engineering and Manufacturing players (26% share) surpassed the demand emancipating from Technology firms (22% share) in the tech hub of Bengaluru.

Demand from Flex operators remained unabated; at 8.7 mn sq ft flex spaces uptake in 2023 was 24% higher as compared to 2022. Flex penetration in the Indian office market is expected to rise further in 2024, as developers are likely to adopt core plus flex strategy for decision making.

Demand Drivers 2023

Sector Area leased

(mn sq ft)

YoY change
 Technology 14.3 -15%
 BFSI                              11.2 64%