Delhi-NCR and Bengaluru are India’s biggest office markets in 2022: JLL report

• India’s office market absorption in 2022 is higher than the pre-pandemic five-year average (2015-19).
  
  
• Delhi-NCR led the way in the list of office absorption rates at 23.7% in the final quarter of 2022.
  
  
• Hyderabad and Chennai show strong year-end momentum and are powered ahead of Mumbai and Bengaluru in Q4 net absorption.
  

As offices are opening up once again almost after two years of the pandemic, the net absorption of office properties across the top seven cities (Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Kolkata, and Pune) has surpassed pre-pandemic levels, a report by real estate company JLL revealed.

Interestingly, the net absorption of office properties this year has also surpassed the five-year pre-pandemic average (2015-2019) by 3.1%. At 38.25 million sq. ft, the net absorption this year is second only to the 2019’s net absorption numbers for the past 10 years, showcasing the strong resilience of the Indian office markets, as per JLL.

“The office market in India has made a strong recovery in 2022 with the year emerging as the strongest in terms of office market performance post-Covid and second only to 2019 over the last decade. Even with the evolving hybrid work ecosystem, we have seen a sharp rise in office occupancy levels,” Rahul Arora, head office leasing advisory India and MD, Karnataka, Kerala at JLL India said.

However, on a quarter-to-quarter basis, the net absorption rate was down by 19% at 7.99 million sq. ft. This was mainly due to delayed decision-making and a cautious approach from occupiers impacting deal closures in the last quarter of the year, says the report.

“We are likely to see some delayed decision-making as businesses look at macroeconomic signals before committing capital for new offices. Driven by segments like flex, healthcare-life sciences, GCCs and manufacturing/industrial along with its leadership position in the global tech ecosystem, office demand is expected to be similar to 2022 with a marginal to the slight upside,” said Dr Samantak Das, chief economist and head of research and REIS, India, JLL.

Delhi-NCR led the way in the list of office absorption rates at 23.7% in the final quarter of 2022. This was followed by Hyderabad and Chennai, which were ahead of Mumbai and Bengaluru. Pan-India net absorption, as a result, was 46.1% higher on a YoY basis, Arora added.

“Over the next 12 months, around 53-58 million sq. ft is lined up with average pre-commitment levels of 14-17%. For assets owned by institutional landlords which are 30% of the supply pipeline, pre-commitment rates stood at 22-25%, signalling the flight to quality with healthy workspaces and ESG considerations being given significant weightage during space planning,” Das said.

Gross leasing at a three-year high

The gross leasing hit a three-year high — up 47.4% YoY, informed JLL. The gross leasing activity for 2022 was at 49.41 million sq. ft because declining Covid cases and greater clarity in the business environment supported on-ground real estate activity, the report said.

Delhi-NCR and Bengaluru were the two biggest office markets in India this year in gross leasing activity, followed by Mumbai. These three markets accounted for over two-thirds share of the overall occupier activity for the 2022 calendar year.

Not just gross leasing, even new completions reached a new historic high for the Indian office markets at 58.27 million sq. ft in 2022. Completions in Q4 2022 were headlined by Hyderabad and Bengaluru which combined for a 60.5% share of the quarterly supply additions.

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