Latest News: India's Office Market Shows Resilience Amid Global Headwinds, Snaps 6-Quarter High?
The office market in India has displayed remarkable resilience in the face of global headwinds, breaking a six-quarter declining trend. Despite challenging conditions, the Indian office market has shown strength and is poised to navigate the current landscape with resilience. In this article, we will explore the factors contributing to this resilience and the positive indicators that suggest continued growth in the office market.
Recovery in the June Quarter
In the June quarter, India's office market witnessed a recovery with 10.49 million sq ft of new completions, marking a 5.3% sequential increase. Hyderabad emerged as the dominant player with a 47.2% share of new completions, followed by Bengaluru with a 22% share. This surge in new completions indicates a renewed confidence in the market and a willingness to invest in office spaces.Strong Leasing Activity
India's office market also experienced robust leasing activity, with the gross leasing activity in the top seven cities reaching 12.7 million sq ft during the quarter. This reflects a stable market sentiment compared to the previous quarter. Despite global headwinds, the gross leasing activity in the first half of 2023 grew by 2.5% compared to the previous year.
Industry-wise Leasing Activity
The technology sector continued to lead in terms of leasing activity, accounting for 23.1% of the overall share. Flex space followed closely with a 17.7% share. Additionally, the manufacturing sector witnessed significant growth, driven by favorable government policies and India's engineering talent. This resulted in the sector's share reaching an eight-quarter high, indicating a positive outlook for the industry.
Key Market Players
Among the top seven cities, Bengaluru emerged as the market leader in terms of net absorption, capturing a 23.5% share. Chennai also witnessed significant gains, driven by major space take-up by manufacturing, industrial, and tech sectors, and secured the second spot with a 22.2% share. Delhi-NCR slipped to the third position with a 17.1% share.
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Factors Driving Resilience
The resilience of India's office market can be attributed to several factors. Firstly, the flight to quality has driven occupier preferences towards core markets and superior-grade projects, resulting in higher occupancy levels. Secondly, India boasts the world's leading Global Capability Centers (GCC) ecosystem, with approximately 27-30% of India's Grade A stock occupied by GCCs. The GCC segment has consistently contributed significantly to the annual leasing activity across various industries.
Outlook and Future Prospects
Looking ahead, the future supply pipeline remains strong, and the leasing momentum is showing resilience. This bodes well for the office sector, especially when market sentiment improves. With moderate to strong pre-commitments in upcoming projects and expectations of increased leasing activity in the second half of 2023, net absorption numbers are expected to remain strong, keeping vacancy levels within a tight range.
Conclusion
India's office market has demonstrated resilience and strength, defying global headwinds. The recovery in the June quarter, strong leasing activity, and positive indicators from various industries highlight the market's ability to adapt and thrive. As India continues to attract domestic and global occupiers, the office market is expected to remain robust and contribute to the overall economic growth of the country.
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