Office leasing activity across 9 cities increased by 33 per cent on-year and touched 15.8 million sqft during the Jul-Sep 2023 period, said a report by CBRE South Asia. The report titled, ‘CBRE India Office Figures Q3 2023’ said that the share of banking, financial services and insurance (BFSI) firms constituted 29 per cent of total leasing of the office sector during the quarter. Mumbai, Bengaluru and Hyderabad dominated the absorption in Jul-Sep 2023 period, collectively accounting for about 60 per cent of the transaction activity, it said.
The BFSI firms’ leasing share surged from 16 per cent in the Apr-Jun 2023 quarter to 29 per cent during the Jul-Sept 2023, driven by significant deal closures by global capability centres of BFSI corporates, while Indian banks and insurance firms continued to expand their footprint in the country.
During the Jul-Sep 2023 quarter, leasing activity was also driven by technology companies, comprising a 23 per cent share, followed by engineering and manufacturing companies (10 per cent), life sciences firms (10 per cent), flexible space operators (8 per cent), and research, consulting, and analytics firms (7 per cent). American and domestic firms equally lead the absorption in Jul-Sep 2023 period with a share of 42 per cent each, the report stated.
According to the CBRE report, during the July-Sep 2023 period, the total office space supply across 9 cities surged to 19.3 million sqft, recording a 94 per cent YoY increase. Bengaluru, Hyderabad and Pune dominated new completions in Jul-Sep 2023 with a share of 77 per cent. The non-SEZ sector remained at the forefront of development completions in the quarter, increasing its share from 75 per cent in the previous quarter (Apr-Jun) to 95 per cent. Further, according to the report, over half (53 per cent) of the completed projects in Jul-Sep 2023 period were green-compliant and received green certifications, such as LEED or IGBC.
In terms of size of office spaces, small-sized (less than 10,000 sqft) to medium-sized (10,000 – 50,000 sqft) transactions drove office space take-up in Jul-Sep 2023 with a share of 86 per cent, which was largely stable on a quarterly basis. The share of large-sized deals (more than 100,000 sqft) saw a slight uptick, from 6 per cent in the previous quarter to 7 per cent in Jul-Sep 2023. “Bengaluru and Hyderabad took the lead in large-sized deal closures during the quarter, with Chennai and Delhi-NCR following suit. A few other such transactions were also reported in Pune and Mumbai,” the report said.
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “India’s office sector has outperformed expectations this year with sustained absorption, driven by optimistic occupier sentiment and a surge in inquiries. While the office sector in 2023 is likely to perform better than predicted at the beginning of the year, India has demonstrated resilience in the face of global economic challenges and remains one of the most attractive destinations for global corporations establishing their global capability centres (GCCs). Simultaneously, domestic companies, particularly in sectors such as BFSI (Banking, Financial Services, and Insurance) and engineering & manufacturing, are displaying an increasing appetite for office spaces in major cities”.
Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “This year, we observe occupiers adopting a multifaceted approach that encompasses optimum strategies. Return-to-office plans are gaining traction, characterized by a concerted effort to craft experiential workplaces that cater to all generations of employees. This year, we anticipate a surge in investments in workplace technology, improved coordination across functions, and a heightened emphasis on transforming workspaces.”
“The popularity of flexible office spaces continues to rise, with an increasing number of occupiers indicating their intent to allocate more than 10 per cent of their portfolios to these solutions. Above this, sustainability has transitioned from being an option to a priority. Leading occupiers are committing to achieve net-zero emissions by 2050, consequently driving demand for green-compliant buildings. This surge in demand has prompted developers to double their green-certified supply over the past seven years,” he added.
A better-than-expected outlook for 2023
The CBRE report stated that the outlook for the Indian office sector in 2023 is optimistic with the sector outperforming initial predictions and thus positive sentiment is being driven by sustained absorption levels observed in Q3 2023. It said that the tenant inquiries and tour requests are on the rise, which is reflecting improved occupier sentiment. APAC Leasing Market Sentiment Index remained above average in September 2023, it added.