Office space leasing up 25% at 11 msf in March quarter: Knight Frank

Bengaluru remained the biggest market with total office space leasing of 3.5 msf of office space, followed by Delhi-NCR which recorded 2.3 msf of gross leasing in the first three months of 2022

Office space transactions grew 25 per cent year-on-year in the March quarter to 10.8 million square feet (msf), according to a report by real estate consulting firm Knight Frank.

Bengaluru remained the biggest market with total leasing of 3.5 msf of office space, followed by Delhi-NCR which recorded 2.3 msf of gross leasing in the first three months. New completion in the first quarter (Q1) of CY22 was recorded at 11.9 msf led by Pune that saw fresh supply of 3.6 msf followed by Bengaluru with 2.5 msf of new office spaces. 

Rents have stabilised or grown in sequential terms during Q1, the report said. Even compared to the year-ago period, rents have stayed stable or grown in five of the eight markets. Bengaluru saw the most growth with a YoY (year-on-year) rise in rental values by 4 per cent in the first quarter.

NCR recorded a rise of 37 per cent YoY to become the second-best performing leasing market with gross leasing volume of 2.3 msf. Hyderabad recorded a 72 per cent YoY growth with total leasing of 1.6 msf. Chennai recorded a rise of 124 per cent YoY with leasing of 1 msf recorded in Q1.  

Ahmedabad, also recorded a substantial 165 per cent YoY rise in gross leasing in Q1, albeit on a low base. Mumbai was the only market that saw a decline – of 24 per cent – in leasing activities with 900,000 square feet (sq ft) being leased in the first quarter of 2022.

The March quarter also saw the addition of 11.9 msf of new office space across top eight cities, registering a rise of 13 per cent over the same quarter last year. Pune led all markets with new supply additions of 3.6 msf in Q1 with a growth of 107 per cent, while Bengaluru recorded new completions of 2.5 msf which was the second highest volume addition for the quarter. Yet, the IT hub’s completions declined by 25 per cent on a year-on-year basis.

Meanwhile, co-working and managed office spaces saw a rise in the share of office space absorption making up 21 per cent of total leasing volume in Q1.

Managed office spaces took up 2.3 msf of office space in the March quarter this year, compared to 0.9 msf in the year-ago period and recording a rise of 151 per cent YoY.  The information technology segment saw a decline in its share of space taken up in the first quarter of 2022, making up about 27 per cent of total leasing versus 32 per cent in Q1 of 2021. The IT sector’s ‘back to office’ transition was hampered by the Omicron variant and caused some IT corporates to postpone their leasing decisions.

Shishir Baijal, chairman and managing director, Knight Frank India, said, “The country has returned to normality backed by a strong vaccination drive that has given India Inc confidence. We expect the office segment to return to its pre-Covid momentum in the next few quarters as the Indian economy continues to strengthen. The significant increase in hiring and the pent-up demand of the past 8 quarters, are expected to drive market volumes in the remainder of the year.”