Office net absorption set to rise 50% YoY in 2023 to 40 mn sq ft: JLL study

Home sales to hit 200,000 units by 2022-end, the highest in over a decade

Net absorption of office space in 2023 is expected to be 37-40 million sq ft, up 50 per cent year on year, according to a JLL report. The absorption for the first nine months of this calendar year hit a three-year high of 30.3 million sq ft and is on track to match the five-year average (2015-2019) for the full year, finds the report by JLL.

In fact, it isn't just office space but the residential and warehousing segments too, that have performed well in 2022 and are expected to continue their upward trajectory in 2023.

According to the report, the housing segment is expected to surpass 200,000 units by the end of this calendar year, the highest in over a decade and close to the 2010 figure of 216,762 units.

Apart from the affordable and mid segments, traction is expected to take place in the premium segment as well, on the back of launches by established developers in prime locations.

The report added that affordability could get impacted as incomes take a hit due to inflationary pressure and global headwinds. (But) the slowing momentum looks to be temporary, given the country’s focus on economic growth along with the likely easing of inflationary pressure, going ahead.

The year-end report also found a slight dip in space take-up by tech firms, but manufacturing, healthcare, and flex have been major movers in 2022 and are expected to remain big drivers of office demand in 2023 as well.

“The tech, along with the GCC story, will continue to support the office market momentum in 2023,” it added.

“The Indian office markets are on track to record net absorption levels like the pre-Covid five-year average, with a potential upside next year clearly, outlining the resilience amid India’s dominance as the world's outsourcing/offshoring hub and its innovation ecosystem creating new office demand,” said Samantak Das, chief economist and head of research and REIS, India, JLL.

The study said the demand in the warehousing and light manufacturing space is estimated to cross 40 million sq ft by 2022-end, surpassing the levels of 2021. Moreover, the momentum of the market could continue in 2023, with net absorption projected to reach 44 million sq ft. The demand for Grade A space has risen and accounts for more than 65 per cent of the total market demand.

“India’s warehousing & light manufacturing sector is expected to cross 40 million sq. ft in space demand in 2022, the highest ever with further growth anticipated driven by 3PL and the growth in the urban logistics landscape,” Das added.

Moreover, the Grade A office stock’s green certifications are set to surpass 45 per cent by 2022-end, and could inch to the 50 per cent mark by 2023-end. Core market vacancies have stayed in single digits and are likely to remain so, the report said.

Also, the year 2022 has witnessed upward rent corrections after being stable for the past three years with rental appreciation observed. Rents are expected to grow 4-5 per cent YoY, with increasing demand from specialised manufacturing sectors, 3PL, and retail companies that require technically specialised facilities.