India’s commercial real estate sector showed uneven performance across major cities in the third quarter of 2023, according to a new report from Savills India.
Overall absorption of commercial space in India totaled 17.3 million square feet in Q3, a 37.5% increase year-over-year. However, new supply only grew 1.6% to 42.6 million square feet. These diverging absorption and supply trends point to tightening vacant space across top property markets.
“Demand is robust, especially for finished grade-A offices,” said Anurag Mathur, head of research and advisory services at Savills India. “But muted speculative construction, funding issues and stalled projects have constrained supply addition.”
The Mumbai and Pune markets saw healthy leasing activity, absorbing 8.4 million and 4.4 million square feet respectively in Q3. Absorption jumped 69% in Mumbai and 2% in Pune from last year.
Bangalore, Chennai and Hyderabad posted more mixed results. Absorption rose sharply in Bangalore at 13 million square feet, up 25% annually. But Hyderabad contracted 2% to 7.1 million square feet while Chennai struggled with just 1.8 million square feet pre-leased — a 65% yearly decline.
On the supply front, only Hyderabad is expanding development pipelines substantially with 29% annual growth to 7.1 million square feet. Other major cities recorded single digit supply increases or outright declines quarter-over-quarter.
Looking ahead, Mumbai, Pune and Bangalore are well positioned for rental growth and compressing vacancies, said Mathur. But weakening economic fundamentals present risks for Hyderabad, Chennai and smaller markets with emerging oversupply troubles.
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