Insights on India’s Office Real Estate Trends in 2023


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    In 2023, Mumbai witnessed a notable surge in office space transactions, totaling 7.4 million square feet (msf), marking a 16% increase compared to the previous year. Additionally, there was a 52% rise in supply, reaching 3.1 msf.

    On the other hand, Bengaluru experienced a 14.3% decline in cumulative commercial transactions, recording 12.5 msf. Experts attribute this decline to inflationary trends in US markets and a slowdown in the tech sector, a major office space occupier in Bengaluru.

    Despite this dip, Bengaluru’s office leasing momentum found support from Global Capability Centres (GCCs), flex spaces, and India-facing occupiers. However, there was a noticeable moderation from tech occupiers, according to the ‘India Real Estate: Residential and Office (July – December 2023)’ report released by Knight Frank India on January 3.

    “While office space absorption scaled to about 15 msf initially, the slowdown in the IT sector led to reduced transactions in Bengaluru, although it remains the second most sought-after city in India,” mentioned Vivek Rathi, Director of Research at Knight Frank India.

    Although Bengaluru faced a downturn in transaction volumes, rental growth remained robust due to limited Grade A office space availability. The average transacted rentals in Bengaluru saw a 6.6% YoY increase, reaching Rs 86.4 per sq ft per month in 2023.

    Overall, the top eight Indian markets reported a total office transaction of 59.6 msf in 2023, marking a 15% YoY growth. These markets include Mumbai, NCR, Bengaluru, Pune, Chennai, Ahmedabad, Kolkata, and Hyderabad.

    Furthermore, while the overall vacancy across these top eight cities dropped to 16.1% in 2023, Bengaluru observed a 1% increase in vacancy levels. Rathi anticipated a rebound in Bengaluru’s office segment by the second half of CY2024, especially as recessionary markets like the US regain momentum.

    Despite the slowdown from third-party IT services companies, the leasing market saw positive influence from GCCs, flex, and India-facing occupiers. GCC players focusing on manufacturing, consulting, and BFSI industries contributed significantly to the office space transactions in 2023, featuring big-ticket occupiers like Qualcomm, Deloitte, and MUFG.

    Notably, Global Capability Centres experienced a remarkable 58% surge in transaction volumes, reaching 20.8 msf in 2023. Meanwhile, India Facing Business segments anchored the office market with 21.9 msf of transactions, with Mumbai and NCR leading the annual India Facing Business office transactions.

    However, there was a visible decline in the share of flex office space, dropping to 17% in 2023 from 19% in 2022, and a significant drop in H2 2023 compared to H2 2022. Despite this nationwide trend, Bengaluru witnessed a 1% increase in flex space leasing, reflecting a 30.3% share of the overall transaction volume.

    “With third-party IT services slowing down, GCC and India Facing Businesses continued to operate in flexible models, resulting in an uptick in Bengaluru’s share of flex spaces,” highlighted Rathi.

    (Source: Moneycontrol)

    Also read: Bollywood Stars’ Diverse Real Estate Ventures in Mumbai


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