2023 office absorption near record high, home sales at 10-year high

January 4, 2024

In 2023 office absorption came near an all-time high at 59.6 million square feet, while residential sales at 3.3 lakh units set a new 10-year record, according to a report by Knight Frank India.

Transactions in the office sector rose 15 per cent on year but fell short of the record 60.6 msf seen in 2019. Residential sales rose five per cent on year. The data pertained to the top eight cities in India.

Office Sector

The office sector started the year on a subdued note and remained so for most of the year as multinational office occupiers were still making up their minds about taking up office space. The slowdown in the information technology sector dented demand, as they have been accounting for a significant volume of office occupancy so far.

Domestic companies have, however, taken the slack resulting in better-than-expected office leasing volume in the year.

The performance of the office market is reflective of the strong occupier activity, said the Knight Frank report. Bengaluru remained the largest market by volume leasing over 12 msf in 2023, followed by Chennai with 10.8 msf and the National Capital Region at 10.1 msf. Chennai also recorded the strongest annual growth of 92 per cent. Bengaluru saw a decline in leasing volumes.

The office market witnessed 42.9 msf of office space completions in 2023.

Rents firmed up across all markets encouraged by demand and a relatively contained supply. Kolkata led the rental growth at 11 per cent, followed by Bengaluru at seven per cent.

The physical occupancies have steadily increased across markets at 57-65 per cent levels in the REIT portfolios, compared to 47-55 per cent last year. The vacancy levels decreased by 94 basis points over last year to 16.1 per cent in 2023.

Office space transactions by India-facing business and Global Capability Centres (GCC) were recorded at 21.9 msf and 20.8 msf, respectively.

“The impetus behind India’s recent dominance in office absorption is attributed to its strong economic fundamentals. The forthcoming year is poised for steady expansion, and 2024 promises to be a standout year for the office market, driven by India-facing businesses and GCCs,” said Knight Frank India CMD Shishir Baijal.

Residential sales, launches

On the residential side, Mumbai was the leader in residential sales in 2023 with sales of 86,871 units, followed by the National Capital Region at 60,002 units and Bengaluru with 54,046 units. These three cities together constituted 61 per cent of the total residential sales during the year.

The renewed demand has led to an accelerated pace in residential development, with both half-yearly and annual volume of units launched reaching their highest levels in a decade, said the report. New home launches witnessed a rise of seven per cent in 2023 with the addition of 3.5 lakh units.

The launch volumes in 2022 and 2023 have surpassed the sales figures for the corresponding periods, a phenomenon that has occurred only thrice in the past ten years.

Mumbai recorded highest residential launches in the country with supply of 93,051 units during the year. Kolkata witnessed the highest growth at 28 per cent followed by Bengaluru at 18 per cent. NCR was the only market to record a marginal slowdown in launches.

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