Real Estate Update: Office transactions jump 15% YoY leading to total absorption of 59.6 msf in 2023, says report

Knight Frank Real Estate Report 2023: The recent real estate trends in the country have shown that office space transactions trended up to an annual level that was within striking distance of all-time high. Global property consultancy Knight Frank India, in their latest report – India Real Estate: Residential and Office (July - December) – cited that a total of 59.6 million square feet (mnsq ft) were transacted across the leading eight markets in the country constituting a 15 per cent year-on-year (YoY) growth in the year 2023. 

The report also showed that office leasing volumes were marginally lower than highest ever of 60.6 mnsq ft achieved in 2019. 

The property consultancy in its report also stated that the performance of the office market is reflective of the strong occupier activity emphasising on the inherent economic strength of the country and strong annual growth amongst the large economies of the world. 

City-wise office leasing volumes

The report showed that while Bengaluru remained largest market by volume leasing over 12 mnsq ft in 2023, Chennai (10.8 mnsq ft) and National Capital Region (10.1 mnsq ft) finished off the top three positions. 

Chennai also recorded the strongest YoY growth of 92 per cent. Bengaluru (-14 per cent) saw a decline in leasing volumes in YoY. 

City-wise office space rental growth

The office market witnessed 42.9 mn sq ft of office space completions in 2023. Rents firmed up across all markets over the course of the year encouraged by demand and a relatively contained supply. Kolkata led the rental growth with 11 per cent YoY followed by Bengaluru at 7 per cent YoY in 2023. 

The consultancy stated that the physical occupancies have steadily increased across markets at 57-65 per cent levels in the REIT portfolios, compared to 47- 55 per cent last year. 

Office space vacancy levels 

Knight Frank India's report showed that the vacancy levels decreased by 94 basis points over last year to 16.1 per cent in 2023. Office space transactions by India Facing Business and Global Capability Centres (GCC) was recorded at 21.9mnsq ft and 20.8 mnsq ft, respectively, in the year 2023. 

City-wise residential units sold

The report also showed that 329,097 residential units were sold across the top eight markets of India in 2023 registering a growth of 5 per cent YoY. New home launches also witnessed a rise of 7 per cent YoY in 2023 with the addition of 350,746 units in 2023. 

Mumbai remained the leader in residential sales in 2023 with sales of 86,871 units, followed by the National Capital Region (NCR) 60,002 units and Bengaluru with 54,046 units. These three cities together constituted 61 per cent of the total residential sales during the year.

Talking about the insights, Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “The impetus behind India's recent dominance in office absorption is attributed to its strong economic fundamentals. The forthcoming year is poised for steady expansion, and 2024 promises to be a standout year for the office market, driven by India-facing businesses and GCCs. India will continue to play up on its natural advantageswhich include excellent real estate, highly competitive rents, very strong talent pool and a consistently growing economy, making it a robust end-user market. These factors will catalyse for advancing further demand for office space. The surge in flexible workspaces will play a pivotal role in fostering growth-oriented businesses in India. With these factors in play, we anticipate the office market to reach new peaks in 2024."