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Office Leasing in India Records Highest Ever Quarterly Growth

Office Leasing in India

Office sector leasing in India recorded the highest-ever activity with a strong performance in the second quarter (Q2) of 2022, which grew by 61% and 18.2 million sq. ft., said CBRE South Asia Pvt. Ltd in its latest office report, ‘CBRE India Office Figures Q2 2022’.

CBRE which is one of the country’s leading real-estate consulting firms said that Bangalore, Delhi-NCR, and Hyderabad dominated the office space absorption in the second quarter and accounted for nearly two-thirds of the overall transaction activity.

CBRE’s Asia Pacific Leasing Sentiment Survey also recorded a significant surge in leasing sentiments across most APAC markets in June 2022, with the highest rise witnessed in India. This also signifies that the outlook for annual space absorption for 2022 is likely to be higher than 2021.

Among all major cities, Bangalore led the office space absorption with 5.6 million sq. ft., followed by Delhi-NCR at 3.9 million sq. ft. and Hyderabad at 2.6 million sq. ft. in Q2 2022. Technology corporates drove leasing momentum with a share of about 31%, followed by engineering and manufacturing companies (16%), flexible space operators (12%), banking and financial services (BFSI) firms (12%), and e-commerce (7%) players.

The report further highlighted office space take-up in Q2 was driven by small (less than 10,000 sq. ft) and medium-sized (10,000 to 50,000 sq. ft.) transactions with a share of around 84%. Bangalore, followed by Delhi-NCR, Pune, and Hyderabad, dominated large-sized deal closures during the quarter, while a few deals were also reported in Mumbai, Chennai, and Ahmedabad.

Due to decreasing vacancy and rising demand for premium assets, a rental increase of about 1% to 5% Quarter-on-Quarter (Q-o-Q) was recorded across multiple micro-markets in Delhi-NCR, Chennai and Bangalore, and Peripheral Business District (PBD) Hinjewadi in Pune. Moreover, driven by growth in select premium assets, Secondary Business District (SBD) Kharadi in Pune and PBD in Hyderabad recorded a rental rise of about 6-9% Q-o-Q.

The report points out that office space supply witnessed an uptick in Q2 2022, growing by 78% Q-o-Q and 64% Y-o-Y touching 16.7 million sq. ft. The supply addition in Hyderabad was particularly notable, as the city’s stock crossed 100 million sq. ft. during the quarter, making it the fourth market in India after Bangalore, Mumbai, and Delhi-NCR to reach that milestone.

Hyderabad, Delhi-NCR, and Bangalore led the supply addition during the quarter and in the first half of 2022 (H1), accounting for a cumulative share of 76% and 68%, respectively. On H1 basis, office absorption stood at approximately 29.5 million sq. ft., recording a growth of 157% also during the same period about 26.1 million sq. ft. of new completions were witnessed, increasing by 26% Y-o-Y.

Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE, said, “The office sector in India reflected a strong recovery in H1 2022 as occupier sentiments were uplifted due to the relatively reduced severity of the Omicron wave, the subsequent relaxation of restrictions, and improved economic activity. It is evident from the leasing activity that employees are resuming office with a flexible approach.

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