Office leasing in nine cities rises 33% in July-September

Office leasing in nine cities increased 33 percent in the July-September quarter from a year ago as more companies reversed their work-from-home policies and asked their employees to report to the workplace.

Office leasing in nine cities increased 33 percent in the July-September quarter from a year ago as more companies reversed their work-from-home policies and asked employees to report to the workplace.

Companies leased 15.8 million square feet of space during the quarter, according to a report by CBRE. This marks a 17 percent increase from the previous quarter.

Banking, financial services and insurance (BFSI) companies accounted for 29 percent of the total leases. About 60 percent of the transactions took place in Mumbai, Bengaluru, and Hyderabad, CBRE said.

The share of space taken by BFSI companies rose to 29 percent from 16 percent in April-June, driven by significant deals for global capability centres, while Indian banks and insurance companies expanded their footprint, according to the report titled CBRE India Office Figures Q3 2023.

The nine cities covered by CBRE are Bengaluru, Mumbai, Hyderabad, National Capital Region, including Delhi, Chennai, Pune, Kolkata, Kochi, and Ahmedabad.

Office space supply

Technology companies had a 23 percent share of the space leased, followed by engineering and manufacturing companies (10 percent), life sciences firms (10 percent), flexible space operators (8 percent), and research, consulting, and analytics firms (7 percent). US and domestic companies each had a share of 42 percent, it said.

Office space supply across the nine cities surged to 19.3 million sq. ft during the quarter, recording a 94 percent YoY increase.

Bengaluru, Hyderabad, and Pune dominated new completions in the quarter with a 77 percent share. The non-SEZ sector stayed at the forefront of development completions, increasing its share to 95 percent from 75 percent in the previous quarter (April-June).

According to the report, over half (53 percent) of the completed projects were green-compliant and received green certifications such as LEED and IGBC, highlighting the ongoing sustainability commitment of developers.

Small-sized (less than 10,000 sq. ft) to medium-sized (10,000-50,000 sq. ft) transactions dominated the quarter with a share of 86 percent, which was largely stable on a quarterly basis.

The share of large-sized deals (more than 100,000 sq. ft) rose to 7 percent from 6 percent in the previous quarter. Bengaluru and Hyderabad took the lead in large-sized deals, with Chennai and the NCR following suit. A few other such transactions were also reported in Pune and Mumbai.

“India’s office sector has outperformed expectations this year… While the office sector in 2023 is likely to perform better than predicted at the beginning of the year, India has demonstrated resilience in the face of global economic challenges and remains one of the most attractive destinations for global corporations establishing their global capability centres,” said Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.

Bengaluru, followed by the NCR, Chennai, and Hyderabad, are expected to drive absorption in 2023, while Mumbai, Pune, and Kolkata are likely to witness steady space take-up during the year, he said.

“Moreover, global and domestic technology firms and consulting companies are exploring opportunities in select tier-II markets, drawn by improved infrastructure, a skilled talent pool, and attractive rental options," he said.

Occupiers are adopting a multifaceted approach that encompasses optimum strategies and return-to-office plans are gaining traction, characterised by an effort to craft experiential workplaces catering to all generations of employees, said Ram Chandnani, managing director, advisory and transactions services, CBRE India.

“This year, we anticipate a surge in investments in workplace technology, improved coordination across functions, and a heightened emphasis on transforming workspaces,” he said.

The popularity of flexible office spaces continues to rise, with an increasing number of occupiers indicating their intent to allocate more than 10 percent of their portfolios to these solutions. Flexible workplaces are designed to provide teams and individuals with different ways to work, depending on their needs.