Gross absorption of office space across the top six cities saw a near threefold rise, to 14.7 million square feet, during April-June 2022, as compared to the same period last year.
Sequentially too, leasing activity remained strong, rising 14% quarter-on-quarter. Pan-India absorption surpassed 27 million square feet in the first half of the year, signalling a strong revival in occupier demand, according to data from Colliers India.
All the major markets saw strong leasing activity during the quarter, driven by high occupier demand for large office spaces. Bengaluru led the leasing at 30% share, while Mumbai and Delhi-NCR accounted for 19% and 18% share, respectively.
Rising demand and increase in supply of quality office spaces led to a sharp decline of 100 basis points in the overall vacancy rates during the three months of April-June at 17%. This is a reversal of trend after nearly 10 quarters since the onset of the pandemic, the property consultant said.
In terms of new supply, the quarter saw an addition of 9.4 million square feet of Grade A stock, a twofold increase over April-June 2021. Hyderabad recorded the highest share of 40% in total supply during the quarter, followed by Bengaluru at 17% share.
However, the supply has taken a dip sequentially, with a 34% decline. However, there are more quality assets expected to be complete during the second half of the year.
Ramesh Nair, CEO, India & managing director (market development), Asia, Colliers said, “The quarter saw increased office occupancy after a hiatus, as demand outpaced supply by a significant margin. Absorption in the first two quarters of the year has already surpassed more than 80% of the total absorption seen in the whole of 2021. Clearly, office demand is well headed to close at 40-45 million sq feet by the end of this year. Resultantly, rentals are also likely to firm up in the next two quarters as the occupancy levels rise.”
The demand from BFSI and consulting firms has risen four-fold during the quarter ended June. Leasing in larger markets was largely led by technology and flexible space occupiers, who are aggressively leasing new spaces.
Large deals, of more than 100,000 sq ft accounted for 47% of the total leasing during the quarter, affirming occupiers’ strong expansion plans. More than 60% of the leasing in the tech markets of Hyderabad and Bengaluru was topped by large-sized deals.