11 July 23
Domestic and global companies helped gross leasing activity in the top 7 cities in H1 by 2.5% from the year-ago period.
Mumbai: The commercial real estate net absorption across India’s top seven property markets broke the six-quarter declining trend by making a recovery in the quarter ended June, supported by demand for global capability centres across industries. While occupiers remain slightly bearish on expansion activity, India continues to see growth from its domestic corporations, and global occupiers are moving ahead with their expansion plans in a steady manner.
The gross leasing activity in the top seven cities of India reached 12.7 million sq ft during the quarter, demonstrating a stable market sentiment in comparison to the previous quarter, according to data from JLL India. Additionally, despite the global headwinds, gross leasing activity in the first half of 2023 grew 2.5% from a year ago.
The technology sector’s share of leasing activity, at 23.1%, continued to lead in terms of overall share of quarterly leasing activity, followed by flex with 17.7%. The manufacturing sector has begun to witness the positive effects of favourable policies by the government and India’s engineering talent, resulting in its share reaching an eight-quarter high.
“The first two quarters of 2023 have witnessed the highest leasing activity compared to the same periods over the past four years. Contrary to predictions, the so-called headwinds effect was not as pronounced, and India has remained a prominent player in the global office market. India boasts the world’s leading GCC ecosystem, with approximately 27–30% of India’s Grade A stock Occupied by GCCs,” said Rahul Aro-Ra, head, office leasing advisory, India, JLL.
According to him, the GCC segment has consistently contributed a significant share to the annual leasing activity across various industries. The growth in segments such as engineering research and development, emerging technologies, and cutting-edge banking, financial services, and insurance (BFSI) solutions and services is expected to generate strong demand in India.
Leasing activity was led by Bengaluru as the biggest market in terms of net absorption with a 23.5% share. Chennai also witnessed significant activity gains driven by major space take-up by the manufacturing, industrial, and tech sectors to jump to the second spot with a 22.2% share and its quarterly net absorption jumping to a 15-year high. Delhi-NCR was third with a 17.1% share, slipping from the top spot it had taken in the past two quarters.
“The flight to quality is playing a significant role in driving occupier preferences towards core markets and superior-grade projects. As a result, we are observing higher occupancy levels. Looking ahead, we anticipate stronger market activity in the second half of 2023, which will contribute to achieving a net absorption level of around 36–39 million sq ft for the full year,” said Samantak Das, chief economist and head of research and REIS, India, JLL.
In the June quarter, 10.49 million square feet of new completions were recorded, up by 5.3% sequentially. Hyderabad dominated with a 47.2% share of new completions, followed by Bengaluru with a 22% share.
Pan-India office space vacancy levels witnessed a marginal drop of 10 bps sequentially to 16.6%, which is expected to remain sticky within the range of 16–17%.
The future supply pipeline remains strong, while leasing momentum is showing resilience, which bodes well for the office sector when market sentiment improves.
With moderate to strong pre-commitments in upcoming projects and expectations of leasing activity picking up steam in the second half of 2023, net absorption numbers are expected to remain strong and keep vacancy within a tight range.
India’s office markets have demonstrated remarkable resilience, maintaining a consistent level of quarterly leasing activity throughout the first two quarters of 2023, led by the technology and flex segments.
Source – The Economic Times