Net office leasing across 6 cities may fall 10% this fiscal: ICRA

Net office leasing across 6 cities may fall 10% this fiscal

Rating agency ICRA on Tuesday said net leasing of office space across six major cities is estimated to decline by 10 per cent this fiscal, from 57 million square feet in the previous year.

The fall in office demand coupled with an influx of huge supply in FY2024, would result in a marginal rise in vacancy levels by 60 basis points to 15.5 per cent by the end of FY2024.

These top six cities are Mumbai, Bengaluru, Delhi-NCR, Hyderabad, Chennai, and Pune. Its sample includes 22 commercial office operators totalling 165 million square feet area.

"The office developers are expected to witness a revenue growth of 11-13 per cent in FY2024 for ICRA's sample set of non-REIT companies, supported by scheduled rent escalation and improvement in occupancy levels of reputed office players," the agency said in a statement.

Further, the rental rates are estimated to rise by 3-5 per cent YoY in FY2024, driven by contracted escalations/lease renewals at higher rates.

ICRA's outlook on the commercial office sector is 'stable'.

The net absorption of office space stood healthy at around 57 million square feet in FY'23 similar to FY'20 levels, as corporates continued to focus on returning to office, and additional space was required for existing tenants.

Physical occupancy increased to around 65 per cent as of June 2023, from 25 per cent in June 2022.