Mumbai sees slowdown in office space leasing, Chennai on the charge

During the second quarter of 2023, Bengaluru, Chennai, and Hyderabad, three key southern cities in India, dominated the office demand, contributing 59% of the total office leasing across the top 7 cities. According to Vestian, a Bengaluru-based real estate consultant, the combined office leasing in these southern cities reached 8.2 million square feet, out of a total of 13.9 million square feet absorbed in the April to June quarter.

However, zooming out, office leasing across the seven major cities declined by 6% compared to the same period last year and this was led by Mumbai which saw leasing slip by 25%. Experts attribute the fall to delays in decision-making by large domestic firms, and multinational companies amid global uncertainties.

Says Shrinivas Rao, CEO, Vestian, "Despite global headwinds, the Indian economy has performed well. India's GDP growth rate showed improvement in the last quarter of FY 2023. Financial markets also performed well, reflecting positive sentiment in the country."

When one looks at demand on a quarterly basis, the April-June period saw a 17% uptick when compared to the last quarter of the financial year gone by.

"Hiring intentions for Q3 2023 improved, indicating optimism about India's growth prospects. The resilience of the Indian economy was reflected in the Indian office market as well, with increased absorption and a fading impact of funding challenges," he said.

Mumbai, NCR see decline

In the April to June 2023 period vs April to June 2022 period, Chennai experienced a 83% surge in leasing, reaching 2.2 million square feet compared to 1.2 million square feet. In contrast, Bengaluru saw a 12% decrease in leasing activity, dropping to 3.7 million square feet from 4.2 million square feet. Hyderabad witnessed a slight decline of 4% to 2.3 million square feet from 2.4 million square feet.

In Mumbai, leasing fell by 25% to 1.8 million square feet from 2.4 million square feet, while Pune saw a 6% rise, reaching 1.8 million square feet from 1.7 million square feet. Delhi-NCR's office leasing remained subdued, experiencing a 5% decrease to 2 million square feet from 2.1 million square feet. Kolkata's leasing activities plunged by 88% to 0.1 million square feet from 0.8 million square feet.

The technology sector maintained its dominant position in leasing activities, capturing the highest market share of 26% during the June quarter. The engineering and manufacturing sector accounted for 19% of leasing activity, while flexible spaces secured a respectable share of 18%, according to the report.



Source: Vestian Research

Says Ishaan Singh, Director, AIPL Group, “There has been no significant impact on demand. We anticipate this positive trend to persist, given our strong optimism about India's growth prospects.” He added that the Indian economy's resilience is evident in the office market, as there has been a notable rise in demand and absorption rates.