Commercial leasing down 19 percent in first quarter of 2023 

Commercial leasing activity declined 19 percent to 10.1 million square feet from the previous year in the first quarter of the calendar year 2023.

Commercial leasing activity declined 19 percent to 10.1 million square feet from the previous year in the first quarter of the calendar year 2023, as overall market activity softened amid recessionary concerns and economic headwinds, a report by real estate and investment consulting firm Colliers said on April 24.

During Q1 2023, leasing by flex-space operators inched closer to that of technology companies for the first time. Flex occupiers leased 2.1 mn sq feet of space in Q1 2023, accounting for 20 percent of the leasing activity, a few paces behind the technology sector’s 22 percent.

Together, both sectors accounted for nearly 42 percent of the leasing in the top six cities — Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, the report said.

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Flex or co-working space is a term used to describe a working arrangement in which employees from different companies come together to work in a shared space. It leads to cost savings through the use of common infrastructures. Operators charge rent on a per-seat basis.

In the January-March period, the office market demand softened but had little impact on the vacancy levels.

"At a time when occupiers are delaying decision-making on leasing office spaces amidst continued economic uncertainties, the office market witnessed signs of stability in Q1 2023 with the vacancy levels remaining intact at 16.4 percent compared to the previous quarter," said Peush Jain, Managing Director, Office services, India, Colliers.

In the six major cities, supply kept in line with demand, stabilising vacancy levels, Colliers said.

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While Delhi-NCR, Pune and Hyderabad saw an increase in vacancy levels, Chennai witnessed a sharp decline. The vacancy levels of office space in Mumbai and Bengaluru remained largely stable, the report said.

Jain said demand and supply were expected to move in unison, keeping the vacancy and rental levels range bound.