The country’s office net absorption recorded its strongest quarter in an 18-month period, touching 10.37 million sq ft in the third quarter, according to JLL India.
The manufacturing sector led the gross leasing activity in Q3, while technology firms still remained slightly restrained.
Moreover, the net absorption of office spaces during the quarter was higher in the top seven cities except Chennai and Kolkata. Hyderabad took the top spot with a 26.1 per cent share, followed by Bengaluru (22.9 per cent) and Delhi-NCR (16.4 per cent).
However, from a year-to-date (YTD) comparison, net absorption in 2023 is slightly lower by 13.9 per cent compared to January–September 2022 as firms deferred growth plans and looked at portfolio optimisation given the global sluggishness. According to JLL India’s forecast for the full year, it remains in the 36–39 million sq. ft. range.
“This strong leasing momentum is driven by India’s tech ecosystem, which is seeing strong offshoring and R&D work across multiple sectors. GCCs accounted for a 44 per cent occupier share in Q3 in terms of operations. This multi-year trend is expected to keep the Indian office markets among the most growth-oriented globally,” said Rahul Arora, Head Office Leasing Advisory, JLL India.
Gross leasing activity
The gross leasing activity across the top seven cities in Q3 2023 stood at 16.03 million sq ft, increasing by a considerable 26.4 per cent q-o-q. According to the report, the impact of favourable manufacturing policies and India’s engineering talent continues to gather momentum as it rose to become the biggest contributor to Q3 leasing activity with an 18.6 per cent share.
Flex continues to occupy the second spot, accounting for a greater share at 18.4 per cent. The sluggishness in technology on account of third-party IT firms evaluating their current portfolio continued, with the sector’s contribution to gross leasing moving down to the fourth spot for the first time in the past decade.
Additionally, the quarter recorded 14.44 million square feet of new completions, a 37.7 per cent q-o-q increase. Bengaluru, Hyderabad, and Chennai—the three tech gateway cities—led the new completions with a combined share of 71.6 per cent.
With new completions surpassing net absorption, the pan-India office vacancy has increased marginally by 20 bps to 16.8 per cent. JLL India estimates that while net absorption is expected to remain strong, office vacancy is likely to remain sticky within the 16–18 per cent range.