January office space leasing slows down due to global headwinds, holidays: JLL

• Monthly commercial leasing activity declined in January as compared to December.
  
  
• Delhi NCR, Chennai and Mumbai accounted for 77% of the leasing activity.
  
  
• January’s aggregate leasing activity was sluggish as it coincides with the holiday season.
  

According to the JLL India Aggregate Monthly Office Lease Tracker, total monthly commercial leasing activity for the month of January stood at 3.2 million sq. ft. It showed a month-on-month decline of 56.4%.

In December 2022, the total leasing activity stood at 7.4 million sq. However, on a year-on-year comparison, it was higher by 93% as the leasing stood at 1.7 million sq. ft last January.

Fresh leasing which included expansion and relocation-driven space accounted for 87% of all recorded transactions during the month. The month of January is typically a slow period, due to the holiday effect.

“We have observed a sluggish period in January for the last couple of years. Many of the big occupants are American firms where the senior guys and decision makers take leave. Also, global headwinds could have led to a slowdown. Also, many of the deals in January spill over into February and March. An overall sluggishness is likely but more sustained trends of demand movement will be visible moving ahead over the course of the next 2-3 months,” says Dr Samantak Das, chief economist and head research & REIS India, JLL.

Due to the pandemic, there was a dent in leasing activities, but in 2022 it reached pre-pandemic levels again. “With the current run rate of 3.2 million sq. ft, we are optimistic that 2023 will be a good year as well, but it is too early to say because there may be some moderations,” says Das.

In 2022, net absorption was over 38+ million sq. ft, and in 2020 and 2021, it was in the range of 25-26 million sq.ft.

According to Office Lease Tracker, the IT sector is presently facing slower employment and sluggish corporate growth expectations, and as a result, space take-up may be more benign as part of a course correction.

“Given the evolving global economic scenario, other occupier categories are anticipated to maintain steady state, although with a minor downward bias in the short-term,” JLL said.

The IT/ITeS category still remained the largest driver of overall market activity in January, accounting for 28% of total market activity, thanks to one large transaction and a few smaller ones. This was followed by manufacturing/industrial (23%) and BFSI (22%).

In January 2023, Delhi NCR, Chennai and Mumbai accounted for 77% of monthly leasing activity. In terms of number of transactions, Mumbai remained the most active market, followed by Delhi-NCR.