The office market in Delhi-NCR has grown significantly in recent years, driven by the region’s strong economic growth and concentration of IT and manufacturing businesses. Driven by the return of working professionals to offices, demand for commercial space in Delhi-NCR is projected to reach approximately 11 million sq ft in 2023.
According to a report by Savills India, the IT sector is expected to continue to be a major tenant in 2023.
Outlook for Delhi-NCR office market
* Office leasing is projected to record approximately 11 million sq. ft. In 2023.
* The IT-BPM sector is anticipated to drive the commercial market of the city this year as well.
* The second biggest contribution in the leasing activity is likely to come from flexible workspaces. Evolving sectors like E-commerce, edtech, media & advertising, and travel & tourism are expected to have a considerable share in the overall leasing.
* Vacancy levels in 2023 are likely to remain range-bound.
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* Average rentals are expected to be stable except in certain pockets which may see a hike owing to limited fresh supply.
* The city is expected to witness a strong supply infusion to the tune of 9.4 million sq. ft. in 2023. Approximately 70% of the new completions will be concentrated in the micro-markets of Gurugram Others and NOIDA Expressway.
Key Highlights of 2022 for Delhi-NCR office market
* Gross absorption in the region was recorded at 11.3 million sq. ft. in 2022, a YOY increase of 46%.
* IT-BPM sector with 24% share, remains the topmost contributor to leasing activity in 2022.
* Flexible workspaces registered a remarkable increase in the leasing share; from 4% in 2021 to 10% in 2022.
* BFSI and E-commerce turned out to be other prominent sectors with 10% contribution from each in the overall leasing activity. Engineering & manufacturing and research & consulting with 9% and 8% share respectively registered a marginal growth in the leasing activity as compared to 2021.
* Large-sized deals of more than 100,000 sq. ft. drove leasing activity in the Delhi-NCR region, constituting 39% of the total office space absorption in 2022. Mid-sized deals (25,000-99,999 sq. ft.) and small-sized deals (<25,000 sq. ft.) contributed to 37% and 24% share, respectively.
* The annual supply infusion in Delhi-NCR, as compared to the annual addition in 2021, was only 1% less in 2022.
* Delhi-NCR’s overall vacancy levels have decreased from 23.0% in 2021 to 21.9% in 2022, as a result of leasing activity outpacing new completions during the year.
* Average rentals in the NCR region have witnessed an annual increase of 8%. MG Road & NOIDA Expressway micro-markets witnessed the highest growth in rentals with 23% and 14% YOY increase, respectively.
Rajat Johar, MD, Delhi-NCR, Savills India, said, “NCR is a major economic hub in India and home to a large number of IT companies, leading to a high demand for office space in the area. The return of working professionals to offices has led to an increase in demand for office space, resulting in higher transaction activity in leasing. However, the slowdown in global market could have an impact on leasing activity among global corporates in the near term.”