India saw highest Q1 office leasing in 5 years this year: Savills India

In Bengaluru, engineering & manufacturing sector leads the demand, trumps those from technology sector occupiers

India saw a 20 per cent year-on-year (Y-o-Y) growth in office leasing between January and March this year, making it the highest first quarter absorption over the last five years.

According to data released by Savills India on Tuesday, the demand for office space in the first quarter of this year was 16.7 million square feet (msf).

The consultancy said that Bengaluru contributed the highest to overall leasing in the country with a share of 27 per cent, followed by Hyderabad at 20 per cent, and Mumbai at 19 per cent.

In Bengaluru, there has been a significant shift in the sector which accounted for the highest demand. The majority of demand this quarter came from engineering & manufacturing occupiers, followed by the technology sector. Earlier, the technology sector used to be the dominant driver.

In Hyderabad, the demand was led by healthcare & pharma occupiers with a notable share of 32 per cent. It was followed by the tech and flexible workspace occupiers.
 

In Mumbai, the BFSI sector continued to be the conventional and majority demand driver with a 39 per cent share followed by the tech sector garnering a 13 per cent share.

While in all the sectors, the tech sector led the leasing activity with a 26 per cent share in overall absorption followed by engineering & manufacturing at 18 per cent and BFSI at 15 per cent. The flexible workspace segment constituted 14 per cent.

Interestingly, in Delhi-NCR, the highest contributor to office leasing used to be information technology and business process outsourcing. It has now been overtaken by flexible workspace occupiers with a share of 35 per cent in gross absorption.

The data from Savills India, however, also highlighted that the new supply of office space saw a decline of 50 per cent with 6.6 msf of completions in Q1 2024. Mumbai was the only city to register a rise in new annual supply (2.2 msf) during this quarter.

For 2024, the consultancy expects the gross office absorption to touch 61 msf, second-highest ever, just after 62.3 msf last year.

“On the back of a strong demand revival in the last three quarters, we expect more deal closures led by tech, BFSI, manufacturing and healthcare industries,” said Naveen Nandwani, managing director (Commercial Advisory and Transactions), Savills India.