Office transactions record 29% YoY growth during Q3: Knight Frank India

The commercial office sector recorded a 7-quarter high in leasing volumes activity in the third quarter of 2022. The transaction volumes have surpassed the pre-pandemic quarterly average of 2019 by 6 per cent and are currently growing at 29 per cent annually. Transaction volumes stood at 16.1 million square feet (mn sq ft) across top eight cities in India during Q3 2022, said a report by Knight Frank, a real estate consultant.

Bengaluru, the largest office market in India, accounted for 45 per cent of the space taken up during Q3 2022. Bengaluru led with 7.3 million (mn) sq ft, registered a 71 per cent year on year (YoY) growth of office transactions during Q3 2022.

Complying with the occupiers demand, 13 million sq ft of new office space was completed which was an increase of 9 per cent in YoY terms in the third quarter. Bengaluru and Hyderabad constituted 63 per cent of the total space delivered during the period, said the report.

As per the data, transaction volumes for offices have gone up but the rental levels have also stabilised or grown in YoY and sequential terms across all markets.

Rentals have also been either stable or witnessed a marginal growth in sequential terms across the top eight cities over the past two quarters. Due to higher demand and lack of Grade A spaceS, Bengaluru and Pune office markets recorded maximum increase in their rental value at 13 per cent and 9 per cent YoY respectively. Hyderabad, Chennai, and Mumbai also witnessed moderate increase in their rental values whereas the rental values in Ahmedabad, NCR and Kolkata remained stable.

“The consistent growth in leasing volumes along with stable to growing rents depicts the strength of the office market. Large scale hiring in the last 18 months, especially in the IT/ ITeS sector and companies implementing return to office policies is creating incremental office space demand.” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

He said that it is further complemented by pent up demand from 2020 – 21 which together are propelling office space demand and he momentum seen in the year so far points at annual volumes that could match the record levels seen in 2019. 

Other Services sector companies were the most active followed by those from the Information Technology (IT) sector accounting for 29 per cent and 23 per cent of the transacted space during Q3 2022 respectively, finds the report. 

The share of the co-working sector in total transactions increased to 23% per cent in Q3 2022 from 6 per cent in Q3 2021 recording the maximum increase across all sectors. 

The sector continued to find the occupier’s favour during the period and volumes transacted by this sector grew 380% YoY. Co-working players were particularly active in Bengaluru as the city accounted for a substantial 52% of the total space transacted by the sector, said the report.