India's office demand has been affected by global economic uncertainties with gross leasing of workspace falling 19 percent in January-March across six major cities, according to a report by Colliers India.
The report showed that the gross leasing fell to 10.1 million square feet (msf) in January-March from 12.5 msf in the corresponding period of the previous year.
During Q1 2023, new supply across the top six cities declined 34 percent year-on-year (YoY), at 9.5 msf.
Bengaluru witnessed significant new project completions, contributing to 42 percent of the total new supply, followed by Hyderabad at 25 percent share.
Vacancy levels and rentals remained variable during the quarter, as the demand was at par with supply.
Colliers India said that the leasing of office space has fallen due to "delayed decision-making by occupiers amidst continued economic uncertainties".
"Large technology occupiers have also been leasing spaces in flex spaces due to their added benefits such as flexible lease terms, lower capex and modern workplace designs. This coupled with ongoing recessionary conditions and layoffs in the technology sector has led to a relative pushback in conventional leasing by these occupiers," the report added.
As per the data, the gross leasing of office space in Bengaluru fell 20 percent to 3.2 msf in January-March from 4 msf.
In Chennai, the leasing rose 7 percent to 1.6 msf from 1.5 msf.
Delhi-NCR saw an 18 percent rise in the absorption of office demand to 2.2 msf from 1.9 msf.
Office leasing in Mumbai fell 19 percent to 1 million square feet from 1.2 msf.
However, Bengaluru and Delhi-NCR were the most preferred locations for top flex operators for their portfolio expansion. Bengaluru accounted for nearly half of the total flex leasing during the quarter, followed by Delhi-NCR at 30 percent share.
“Share of the technology sector has declined steadily from 34 percent in Q1 2022 to 22 percent in Q1 2023, as corporates continue to focus on building in operational efficiencies through a hybrid model," Peush Jain, Managing Director, Office services, India, Colliers said.
While hybrid working has impacted demand for conventional office spaces, it has also fuelled demand for flex spaces across top markets, Jain added.