Office space demand dipped 6% to 13.9 mn sq ft in Apr-Jun quarter: Vestian

Three key southern cities - Bengaluru, Chennai, and Hyderabad - dominated office demand with the contribution of 59 per cent of the total office leasing in the quarter

The demand for office spaces in the top seven Indian cities fell six per cent in the quarter that ended on June 30, as compared to the same quarter last year, a report released by Bengaluru-based real estate consultancy Vestian on Thursday showed.

The office leasing fell to 13.9 million square feet between April and June against 14.8 million square feet in the year-ago period. The report, "The Connect Q2 2023" attributed that fall to the delays in decision-making by large domestic firms and multinational companies (MNCs) amid global uncertainties.

However, the demand was up 17 per cent compared with the previous quarter, which ended on March 31 this year.

Interestingly, three key southern cities - Bengaluru, Chennai, and Hyderabad - dominated office demand with the contribution of 59 per cent of the total office leasing. The combined office leasing in these three cities stood at 8.2 million square feet.

Chennai saw the highest 83 per cent rise in leasing to 2.2 million square feet from 1.2 million square feet. The leasing in Bengaluru decreased 12 per cent to 3.7 million square feet from 4.2 million square feet.

Hyderabad witnessed a fall of four per cent to 2.3 million square feet from 2.4 million square feet.

In Maharashtra's two major office markets, the leasing in Mumbai fell 25 per cent to 1.8 million square feet from 2.4 million square feet. But in Pune, the demand was up six per cent to 1.8 million square feet from 1.7 million square feet.

The office leasing in Delhi-NCR fell five per cent to two million square feet from 2.1 million square feet. In Kolkata, the leasing activities plunged the highest, 88 per cent, to 0.1 million square feet from 0.8 million square feet.

In all sectors, the highest demand came from the technology sector. It captured the highest market share of 26 per cent in the June quarter.

While the engineering and manufacturing sector accounted for 19 per cent of the leasing activity, flexible spaces captured a share of 18 per cent, the report added.

Shrinivas Rao, chief executive officer of Vestian said that the hiring intentions in the current quarter, Q2FY24, have improved. Coupled with the fading impact of funding winter, the demand for offices is likely to increase in the second half of 2023.

"As global markets stabilise, the second half of the year is expected to see increased real estate activities across the country," Rao said.