Pan India leasing volumes maintained healthy momentum in Q2 and recorded the third consecutive quarter with 20+ MSF of transaction activity, the first time ever in the Indian office market. Clearly, the rapid recovery in leasing activity witnessed in the second half of the previous year has gained significant strength in the current year. Faster closures of large deals by global multinationals across major cities and strong demand even from domestic enterprises highlight the marked improvements in occupier confidence in recent quarters. Fresh demand continues to remain the dominant driver of space takeup by multinationals, which points towards implementation of expansion plans and augurs well for the health of the office market. Moreover, higher precommitments in cities such as Bengaluru and Pune highlight the medium term growth focus of occupiers, which again, is welcome news for the office market. Bengaluru remained the prime market contributing a significant share of pan India fresh demand with Mumbai witnessing healthy growth in fresh space takeup. Delhi NCR and Hyderabad also reported fairly robust lease transactions. Among smaller markets, Kolkata performed well with the highest post COVID fresh space takeup. The active deal pipeline remains healthy and expected deal closures in upcoming quarters are likely to keep near term momentum intact. The bright Indian economic outlook and resilience of the US economy are serving as additional tailwinds for the office market.
The second quarter stood out for a sharp decline in new supply, the lowest since Q1 2023. Interestingly, Pune and Chennai recorded no supply in the quarter. Delays in grants of occupancy certificates for projects coupled with lower preleasing in some cities could be possible explanations for the decline in quarterly supply. However, the pan India supply pipeline remains strong and given the robust fresh demand, the lower supply in Q2 could be a temporary blip in the market. Speculative supply is likely to increase on the back of rising demand for premium projects with provision of world class infrastructure becoming a priority for occupiers. Hyderabad and Mumbai led supply addition in Q2, followed by Bengaluru. Pan India headline vacancy fell in Q2 but is likely to rise in the quarters ahead due to the large supply likely to enter the market.
Key Highlights
Q2 2024
- 21.8 MSF gross leasing volume (GLV) in top 8 cities in Q2 2024; a 27% growth on an annual basis and an 8.4% expansion over the previous quarter.
- Bengaluru was leading in terms of pan-India GLV in Q2, accounting for 25% share, followed by Mumbai, Pune, Delhi NCR and Hyderabad with shares of 22%, 15% and 14%, respectively.
- IT-BPM accounted for the highest share (~25%) in quarterly leasing, followed by BFSI and flexible workspace with 21% and 14% shares, respectively. Engineering & manufacturing’s share was relatively lower at 12% of GLV in the quarter.
- 7.8 MSF of new completions were recorded in Q2 2024 with Hyderabad and Mumbai accounting for 34% each followed by Bengaluru with a 28% share.
- Net absorption in Q2 2024 stood at 9.2 MSF, an increase of 49% on an annual basis though 18.5% lower than the net absorption witnessed in the previous quarter.
