Bengaluru office market remains tepid in Q2; gross leasing down 28% YoY

Bengaluru’s office market remained tepid during the July-September period as gross leasing of office space went down 28 per cent year-on-year and new supply declined 25 per cent, according to real estate consultant Vestian.

Bengaluru’s office market remained tepid during the July-September period as gross leasing of office space went down 28 percent year-on-year and new supply declined 25 percent, according to real estate consultant Vestian.

The consultant expects office demand in Bengaluru to improve, with large IT companies asking staff to rejoin regular work.

Bengaluru, the largest office market, with a huge IT industry presence, witnessed a significant decline in leasing transactions and new supply. Absorption of office space in the city fell 28 percent year-on-year to 3.6 million square feet during the July-September quarter. New supply also declined 25 percent year-on-year to 2.7 million square feet.

Leasing of office space in Delhi-NCR went down 14 percent year-on-year to 3 million square feet during the July-September period. New office space supply plunged 82 percent to 0.5 million square feet. During the quarter, leasing transactions of office space in Chennai rose 82 percent to 2 million square feet. New supply shot up 71 percent to 1.2 million square feet.

In Hyderabad, the leasing of office space jumped 270 percent to 3.7 million square feet. New supply soared 175 percent to 5.5 million square feet.

Leasing of office space in Mumbai rose 21 percent to 2.3 million square feet. New supply jumped 125 percent to 0.9 million square feet. Pune witnessed an 83 percent increase in office leasing to 1.1 million square feet, while new supply rose 73 percent to 1.9 million square feet.

According to the data, the overall absorption of office space in the July-September period rose 21 percent year-on-year to 15.9 million square feet across seven major cities: Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Delhi-NCR, and Kolkata.

Across these seven cities, new office space supply increased 26 percent annually to 13.4 million square feet during the third quarter of the year.

“In Q3 2023, the Indian office sector witnessed increased absorption since the pandemic and new completions went up to a five-quarter high," said Shrinivas Rao, CEO, Vestian, a commercial real estate services company.

"Rentals are expected to rise in these cities on the back of renewed demand as many large conglomerates are calling their employees back to the office," said Rao.

The IT-ITeS sector dominated leasing during the July-September period with a 25 percent share, while the BFSI sector accounted for 20 percent of the total absorption. The manufacturing and engineering sector, and flexible space sector accounted for 17 percent and 16 percent, respectively.