Monthly office leasing activity for January drops 56.4 percent month-on-month to 3.2 million sq ft: JLL

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The monthly office leasing activity for January dropped by 56.4 percent from the levels seen in December 2022 and stood at 3.2 million sq ft. The IT sector is currently facing slower employment and poor corporate growth expectations and, as a result, space take-up may be more benign as part of a course correction, a report by real estate consultancy JLL said on February 20.

The office space take-up across the sector in January 2022 stood at 1.7 million sq ft, the report said. This means that office leasing was still 93.1 percent higher in January this year compared with the previous year.

But the IT/ITeS category still remained the largest driver of overall market activity in January, accounting for 28 percent of total market activity, thanks to one large transaction and a few smaller ones. It accounted for 22 percent of market activity in January 2022 and 29 percent in December 2022, the report noted.

In January 2023, the BFSI sector accounted for 22 percent of the total market activity compared to 9 percent in January 2022. The manufacturing and industrial sector accounted for 23 percent in January this year compared to 14 percent in January 2022. The co-working sector was down to 8 percent versus 20 percent in January 2022, the report noted.

In January 2023, Delhi NCR, Chennai and Mumbai were the top three cities, in that order, accounting for 77 percent of the monthly leasing activity. Mumbai remained the most active market in terms of number of deals, followed by Delhi-NCR, the report said.

Fresh leasing, which included expansion and relocation-driven space take-up, accounted for 87 percent of all recorded transactions during the month, it noted.

Aggregate market leasing activity refers to lease transactions for all grades in the top seven cities (Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata) recorded during the period, including confirmed pre-commitments and term renewals. Deals in the discussion stage have not been included in the report.

On expected lines, December 2022 saw significant deal closures, though the total leasing volumes were down 12.5 percent on-year. The following month of January is typically a slow period given the holidays and a focus on mapping out the year ahead. Mostly deals that slipped due to certain reasons get concluded during this month, the report noted.

“January’s aggregate leasing activity was sluggish but on expected lines as this period coincides with the festive/holiday season and future business plans being put together with only spillover deals largely getting executed during this period. As future business projections are made under the shadow of global headwinds and the tech sector, facing a period of course correction is likely to be slow in space take-up, we expect that rising office occupancies and growth in other occupier segments should keep the momentum steady,” said Samantak Das, chief economist and head of research and REIS, India, JLL.

However, an overall sluggishness is likely but more sustained trends of demand movement will be visible over the course of the next two to three months, he said, adding that if global headwinds do not slow down by June this year, then there may be a likelihood of net absorption in office space falling short of 2022.

India’s office market net absorption across the top seven cities for the full year 2022 was recorded at 38.25 million sq ft, hitting a three-year high.