Best ever office leasing performance: Chennai, Delhi NCR, Mumbai

Mumbai, 09th April 2024: The markets of Chennai, Delhi NCR, Mumbai and Pune achieved historic gross leasing highs in Q1 2024 (Jan-March) in contrast to all earlier Q1 performances in these cities. The most important forces behind this have been home occupiers, notably within the BFSI, Flex, and manufacturing/engineering sectors, who’ve outperformed their worldwide rivals by driving demand in these areas.

At an general degree as nicely, gross leasing exercise reached a formidable 15.16 million sq. ft in Q1 2024, a rise of ~13.8% in contrast to the identical interval final yr. This marks the third consecutive quarter the place gross leasing has surpassed the 15 million sq. ft mark, following the historic excessive of 20.94 million sq. ft in This fall 2023 and 16.03 million sq. ft in Q3 2023. Notably, this additionally represents the second-highest gross leasing ever recorded within the first quarter of any yr, solely trailing the degrees of 17.3 million sq. ft witnessed in Q1 2020. The quarter has set the platform for India’s office market to succeed in and even surpass the height exercise ranges witnessed in 2023.

Domestic occupiers march forward.

In the primary quarter of 2024 belonged to the home occupiers, notably within the BFSI, Flex, and manufacturing/engineering segments as they gained a majority share in office leasing.

“India’s office ecosystem is a mix of “office to the world” and powerful home sector progress. While world firms stay robust takers of office area in India, their sluggish decision-making has seen the robust home financial system choose up the slack. In Q1 2024, home occupiers intensified their demand, contributing roughly 53% to the gross leasing exercise. This stays in step with the pattern being noticed over the previous 2 years the place home occupiers have persistently gone toe to toe with their world counterparts in area acquisition. Moreover, this highlights the resilience and flexibility of India’s office market,” mentionedDr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL

Flex rise as tech continues to stay sluggish.

Flex and manufacturing/engineering sectors preserve a powerful bullish outlook on their progress trajectory, whereas the tech business continues to grapple with the problem of sluggishness. Space take-up by third-party outsourcing corporations, given world headwinds and slower income progress continues to affect the tech sector, with its share of gross leasing at 24.2%, principally range-bound in contrast to the earlier yr. Flex area operators proceed to play a major function in India’s office markets, accounting for 21.0% of the gross leasing in Q1 2024, the best area take up ever for this section put up Covid. The manufacturing/engineering sector is witnessing a sustained strengthening in demand, with the sector’s share rising to twenty.2%, the best in practically three years, as India’s GCC ecosystem continues to change into extra broad-based with high-end R&D work coming into the nation and creating expansion-driven area demand.

“India’s office market has persistently demonstrated unparalleled resilience and progress within the face of worldwide sluggishness and has benefitted from its robust underlying fundamentals that help the sustained progress in demand. Over the following 3 – 4 years, we anticipate the market exercise ranges of over 60 million sq. ft witnessed in 2019 and 2023 to change into the brand new regular, with gross leasing ranges aligning extra carefully with the vary noticed throughout these years. In 2024, the tempo of company area take-up is anticipated to considerably speed up within the latter half of the yr, following the final elections and gross leasing is estimated to doubtlessly surpass the 63 million sq. ft recorded simply final yr,”mentioned Rahul Arora, Head, Office Leasing & Retail Services, India, JLL

Delhi NCR and Bengaluru account for ~47% of the gross leasing in Q1 2024

Delhi NCR and Bengaluru emerged as frontrunners out there, accounting for 26.6% and 20.4% of the general gross leasing in Q1 2024, respectively. Chennai continued its robust exhibiting, following up from the momentum witnessed in 2023, contributing to a major 17.6% share of the general leasing. Mumbai and Pune adopted with gross leasing figures of two.11 million sq. ft and 1.81 million sq. ft, respectively.

Gross Leasing (mn sq ft)

Source: Real Estate Intelligence Service (REIS), JLL Research

Net absorption up 10.9% Y-o-Y

India’s web absorption** throughout the highest 7 cities, stood at 8.30 mn sq ft, up by 10.9% y-o-y. This first quarter efficiency is second solely to Q1 2022 amongst all Q1 numbers since 2020, signifying the constant headcount growth-driven enlargement exercise by corporates in India. It is a testomony to the nation’s expertise pool and aggressive prices that almost all world corporations’ enterprise plans contain capability augmentation in India. The web absorption throughout the quarter was led by Delhi NCR with a 27.3% share, adopted by Bengaluru with 20.8%, Hyderabad with 18.7% and Mumbai with 18.1% shares, respectively. The first quarter web absorption for the cities of Delhi NCR, Mumbai and Chennai have been additionally all at post-COVID highs in contrast to earlier Q1 numbers, symptomatic of expansion-led demand on observe to close historic highs within the India office market.

Outlook: Market exercise primed to surpass 2023 peak ranges

This constructive trajectory can be primarily pushed by the entry of latest Global Capability Centers (GCCs) into the nation, in addition to the enlargement of operations for present GCCs throughout all key and rising expertise segments. Furthermore, India’s favorable manufacturing insurance policies are predicted to draw much more strongly high-end analysis and growth (R&D) work, additional stimulating demand within the office market. The momentum of flex area operators amidst a probable revival in tech outsourcing as world market situations enhance are additionally anticipated to play a key function in taking India’s office market to higher heights in 2024 and past.