Office Space Absorption At 14 Mn Sq Ft In Q1 2023, Falls 11% YoY: Study

Office space absorption in India’s six biggest cities stood at 14 million square feet in the first quarter of calendar year 2023 (CY23), a 16 per cent growth quarter-on-quarter (QoQ).

The absorption rate year-on-year (YoY) fell by around 11 per cent, said a report by Savills India, a real estate advisory firm. Office space increased 23 per cent QoQ in terms of new supply infusion, which stood at 13.1 million square feet in Q1 2023.

Flexible workspaces were the leading cause for office space absorption and accounted for 27 per cent of gross absorption in Q1 2023, the report said.

Flexible workspaces were followed by the Information Technology--Business Process Management (IT-BPM) sector and Banking, Financial Services, and Insurance sector (BFSI), accounting for 23 per cent and 16 per cent demand share respectively.

Total office stock across top 6 cities stood at 717.1 million square feet as of Q1 CY23.

Overall India vacancy levels across stood at 18.4 per cent in Q1 CY23.

According to the report, Bengaluru, Delhi-NCR and Chennai together accounted for two-thirds of quarterly demand. Maximum supply infusion was witnessed in Hyderabad and Pune, with a cumulative share of over 50 per cent.  

Bengaluru witnessed leasing activity of around 3.9 million square feet in Q1 CY23, accounting for around 28 per cent of India’s gross absorption.

, Chennai continued to remain in the top-3 city list with respect to demand, with three-fourth of the city’s office demand coming from the micro markets of the city. Whereas in Mumbai demand was driven by small and mid-sized deals with the BFSI sector continuing to drive office space take-up in the city, the report said.

Hyderabad witnessed leasing activity of around 1.8 million square feet, corresponding to a strong YoY increase of 50 per cent, with stable rentals across micro markets.

In Pune, flexible workspaces continued to thrive in Q1 2023, with a 41 per cent share in demand.

Savills India expects CY23 to witness gross absorption to the tune of 48.5 million square feet, meanwhile annual supply infusion is expected to stand at 61.5 million square feet by the year end.