Commercial leasing in India grows to record high in Q4

Rising demand for office and warehousing spaces fuelled demand for commercial leasing to a record high in the October-December period. Gross leasing volume (GLV) in the commercial leasing market in India jumped 84 per cent year-on-year in Q4 to touch 27.4 million sq.ft (msf), as per data from commercial real estate services firm Cushman & Wakefield. This is not only the highest quarterly GLV ever but it also beats the previous record high volume of Q4, 2019 by a significant 4.5 msf margin. 

“Indian office sector soared to new heights in the fourth quarter of 2023, defying all odds and setting record breaking highs in both gross lease volume (GLV) and net absorption,” it said in a latest report. During the quarter, net absorption of commercial spaces surged by a whopping 106 per cent over the same period last year to 18.6 msf. While sequentially it grew by 129 per cent. GLV indicates all leasing activity in the market, including renewals of contracted term by corporates while net absorption data reflects new spaces occupied during the period, adjusted for exits, if any.

Total GLV recorded in 2023 at 74.4 msf - 4 per cent higher than the last year’s record high. The net absorption for calendar year 2023 stood at 41 msf, which is 2 msf less than the highest net absorption volume seen in the Indian office sector so far in 2019. “This impressive surge in office demand is primarily driven by fresh leasing and, in certain cases, completion of buildings with good pre-commitments being brought forward, resulting in healthy level of net absorption during Q4-23. The active pipeline of deals currently suggests that this momentum in fresh space leasing is likely to continue over next couple of quarters,” analysts at Cushman & Wakefield noted.

Among top markets, Bengaluru’s growth has been most impressive, with the city recording three times the office leasing volumes as compared to the last quarter. Besides, the city has registered a growth of 21 per cent over its previous peak of Q2, 2022 volume with over 8.3 msf of leasing volume in Q4, 2023. The capital of Karnataka also accounted for over 40 per cent of the country’s overall net absorption with demand for fresh space driven by E&M industry (30 per cent), followed by IT and business process management (22 per cent), professional services (13 per cent) and flex space operators (9 per cent). With the pace of employees retiring to office picking up in sectors such as E&M, Prof. Services and BFSI, therefore, the requirement for space by these sectors seem to precede IT-BPM.

The city that also witnessed record leasing was Chennai with this quarter’s volume standing at around 3.5 msf – a quarter-on-quarter growth of 99 per cent. When compared with the Q4 numbers of 2022, the city witnessed an impressive 109 per cent growth. Mumbai’s office market has also shown good traction with 54 per cent & 15 per cent quarterly and yearly growth, respectively.