Office leasing activity dropped in January 2023, claims a recently released industry report amid slowdown in IT sector and overall global sluggishness. However, the total leasing of office space, which comprises demand for all grades of buildings, rose 93 per cent year-on-year in January to 3.2 million square feet.
According to a report by real estate consultancy JLL on February 20, the monthly office leasing activity in January 2023 decreased by 56.4 percent compared to December 2022 levels. The report attributed this decline to the slowdown in IT sector, which is currently facing slower employment, layoffs and poor corporate growth expectations, causing a more measured approach to space take-up as part of a course correction.
Despite the decline, the report stated that office space take-up across all sectors in January 2022 still reached 1.7 million sq ft, representing a 93.1 percent increase from the previous year.
Furthermore, the IT/ITeS category remained the primary contributor to overall market activity in January, accounting for 28 percent of total market activity due to one large transaction and a few smaller ones. This percentage was lower than the 29 percent reported in December 2022 but higher than the 22 percent recorded in January 2022.
Furthermore, the BFSI sector accounted for 22 percent of the total market activity compared to 9 percent in January 2022. The manufacturing and industrial sector accounted for 23 percent in January this year compared to 14 percent in January 2022. The co-working sector was down to 8 percent versus 20 percent in January 2022, the report noted.
In January 2023, Delhi NCR, Chennai and Mumbai were the top three cities, in that order, accounting for 77 percent of the monthly leasing activity. Mumbai continue to remain the most active market in terms of number of deals, followed by Delhi-NCR, the report said.
India’s office market net absorption across the top seven cities for the full year 2022 was recorded at 38.25 million sq ft, hitting a three-year high.
January is typically a slow period given the holidays and a focus on mapping out the year ahead and usually it is the delayed deals that get usually closed during this month, the report noted.
“January’s aggregate leasing activity was sluggish but on expected lines as this period coincides with the festive/holiday season and future business plans being put together with only spillover deals largely getting executed during this period.
“As future business projections are made under the shadow of global headwinds and the tech sector, facing a period of course correction is likely to be slow in space take-up, we expect that rising office occupancies and growth in other occupier segments should keep the momentum steady,” reports quoted said Samantak Das, chief economist and head of research and REIS, India, JLL, as saying.
Overall global sluggishness is expected to impact office absorption in 2023. If global headwinds do not slow down by June this year, then there may be a likelihood of net absorption in office space falling short of 2022, Das said.