Office leasing in nine major cities saw a significant uptick, rising by 33% during the July-September quarter compared to the same period the previous year. This surge in leasing activity can be attributed to the growing trend of companies recalling their employees to the physical workplace as work-from-home policies are being reversed.
According to a report released by CBRE, companies in these cities leased a substantial 15.8 million square feet of office space in the third quarter of the year, marking a 17% increase from the preceding quarter. Notably, the banking, financial services, and insurance (BFSI) sector played a prominent role in this growth, accounting for 29% of the total leased office spaces. The majority of leasing transactions, around 60%, took place in three key cities: Mumbai, Bengaluru, and Hyderabad.
The report, titled “CBRE India Office Figures Q3 2023,” highlighted a notable shift in the share of office space occupied by BFSI companies, which rose from 16% in the April-June quarter to 29% in the latest quarter. This was driven by significant deals related to global capability centers, as well as expansions by Indian banks and insurance companies.
The nine cities covered by CBRE’s report include Bengaluru, Mumbai, Hyderabad, the National Capital Region (including Delhi), Chennai, Pune, Kolkata, Kochi, and Ahmedabad.
Breaking down the share of office space leased by various sectors, technology companies secured a 23% share, followed by engineering and manufacturing companies at 10%, life sciences firms also at 10%, flexible space operators at 8%, and research, consulting, and analytics firms at 7%. The report indicated that both US and domestic companies held an equal share of 42%.
In terms of office space supply, the nine cities experienced a remarkable surge, with a 94% year-on-year increase, totaling 19.3 million square feet during the quarter. Bengaluru, Hyderabad, and Pune were at the forefront of new completions, accounting for 77% of the total. The non-SEZ (Special Economic Zone) sector notably increased its share of development completions to 95% from 75% in the previous quarter.
Green sustainability initiatives were also on the rise, with 53% of completed projects receiving green certifications such as LEED and IGBC, showcasing developers’ commitment to sustainability.
The majority of leasing transactions during the quarter were small to medium-sized, with sizes less than 10,000 square feet to 10,000-50,000 square feet, accounting for 86% of deals. Large-sized deals, exceeding 100,000 square feet, saw a modest increase from the previous quarter, rising to 7%. Bengaluru and Hyderabad led in these large-sized transactions, with Chennai and the National Capital Region following suit.
Anshuman Magazine, Chairman and CEO of CBRE in India, South-East Asia, Middle East & Africa, expressed optimism about India’s office sector, highlighting its resilience amid global economic challenges. He noted that India remains an attractive destination for global corporations establishing their global capability centers.
Looking ahead, Bengaluru, followed by the National Capital Region, Chennai, and Hyderabad, are expected to drive absorption in 2023. Mumbai, Pune, and Kolkata are likely to witness steady space uptake during the year. Additionally, both global and domestic technology firms and consulting companies are exploring opportunities in select tier-II markets due to improved infrastructure, a skilled talent pool, and attractive rental options.
Ram Chandnani, Managing Director of Advisory and Transactions Services at CBRE India, noted that occupiers are adopting multifaceted approaches to cater to the needs of all generations of employees. Workplace technology investments, improved coordination across functions, and a focus on transforming workspaces are anticipated trends for the year.
Furthermore, flexible office spaces continue to gain popularity, with an increasing number of occupiers expressing intent to allocate more than 10% of their portfolios to these solutions. Flexible workplaces are designed to offer diverse work environments to accommodate various work styles and preferences.
Also read: India’s Office Leasing Soars 5% to an 18-Month High in Q3 2023 Despite Global Challenges