The Bengaluru office market was affected during July-September period as gross leasing of workspace fell 28 per cent and new supply declined 25 per cent year-on-year amid subdued demand from corporates, according to real estate consultant Vestian. Vestian on Monday released its office market report of India's top seven cities for the third quarter of this calendar year.

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In Bengaluru, the absorption of office space fell 28 per cent year-on-year to 3.6 million square feet during September quarter 2023 from 5 million square feet in the year-ago period.

The new office supply in Bengaluru declined 25 per cent year-on-year to 2.7 million square feet. Vestian expects office demand in Bengaluru to rise with large IT companies deciding to call their staff back to office.

Overall, across the seven cities, Vestian data showed that gross office space leasing rose 21 per cent to 15.9 million square feet in July-September this year from 13.11 million square feet in the year-ago period.

Apart from Bengaluru, the other six major cities are Delhi-NCR, Mumbai, Chennai, Kolkata, Pune and Hyderabad. A 26 per cent increase was seen in new supply across these top seven cities to 13.4 million square feet during the quarter under review.

Commenting on the report, Shrinivas Rao, CEO, Vestian, said, “In Q3 2023, the Indian office sector witnessed heightened real estate activities as absorption reached the highest level since the pandemic and new completions increased to a five-quarter high." The office market also reported healthy vacancy levels with an appreciation in average rentals, he added. "This showcases the robust fundamentals of the sector and a healthy demand for quality office spaces in India," Rao noted.

As per the Vestian data, the gross leasing of office space in Delhi-NCR fell 14 per cent to 3 million square feet during July-September from 3.5 million square feet in the year-ago period.

New office space supply in NCR plunged 82 per cent to 0.5 million square feet. During the September quarter, the leasing transactions of office space in Chennai rose 82 per cent to 2 million square feet from 1.1 million square feet in the corresponding period of the previous year.

The new supply in Chennai was up 71 per cent to 1.2 million square feet. In Hyderabad, the leasing of office space jumped nearly 4-fold to 3.7 million square feet from 1 million square feet. New supply in Hyderabad surged 175 per cent to 5.5 million square feet.

Leasing of office space in Mumbai rose 21 per cent to 2.3 million square feet from 1.9 million square feet. New supply in Mumbai jumped 125 per cent to 0.9 million square feet.
Pune witnessed 83 per cent increase in office leasing to 1.1 million square feet from 0.6 million square feet. New supply in Pune rose 73 per cent to 1.9 million square feet.

Leasing of office space in Kolkata increased to 0.2 million square feet during July-September from 0.01 million square feet in the year-ago period. New supply in Kolkata stood at 0.7 million square feet in the third quarter of this calendar year.

On the demand-supply trend, Rao said, "The key office markets in southern cities evolved and commanded the highest share of the pan-India absorption and new completions."

"Rentals are expected to rise in these cities on the back of renewed demand as many large conglomerates are calling their employees back to office," he observed.

The IT-ITeS sector dominated leasing during the July-September period with 25 per cent share. The BFSI sector accounted for 20 per cent of the total absorption in the third quarter of 2023.

Moreover, Manufacturing & Engineering and Flexible Space sectors accounted for 17 per cent and 16 per cent share, respectively, in Q3 2023.

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