Occupier confidence has certainly improved over the last 3 months as pandemic induced uncertainty has gradually declined. Faster vaccine administration, particularly across major cities, along with removal of mobility related restrictions have had a positive impact. Return to Office has started and is expected to gain strength in Q4 with pre-pandemic normalcy likely coming back over the next 6-12 months. That said, we expect this healthy recovery to continue in the short term with a possible full-fledged rebound in 2022.
In this report, we analyse the performance of the Indian office markets with the third quarter signalling a revival in office demand and exuberance in business sentiments post the second wave. Total pan India gross leasing was recorded at 14.2 msf, a significant rise of 46% compared to Q2 suggesting that office demand is coming back as vaccinations gain pace and the impact of pandemic recedes. Bengaluru, Mumbai and Delhi NCR were the most active markets, together accounting for nearly 3/4th share of the overall Pan India demand.
Key Highlights
- 14.2 msf gross leasing volume in Top 8 cities in Q3 2021; a 45.8% growth q-o-q, Bengaluru recorded the highest activity with a market share of 34.0%, followed by Mumbai and Delhi NCR
- Term renewals at 6.9 msf, a 3X rise on a quarterly basis, indicative of strengthening occupier confidence post the pandemic and their strategies to take advantage of current market conditions
- IT-BPM accounted for highest share (41.9%) in quarterly leasing followed by Engineering & Manufacturing and Professional Services
- 6.9 msf of new completions were recorded in Q3, a 14.1% decline on a q-o-q basis; Delhi NCR witnessed the highest share of 43.0%
- Net absorption in Q3 2021 stood at 4.34 msf, an 8.6% q-o-q growth
- Vacancy rate of 17.6% on par with Q2 but a 200 bps rise y-o-y, vacancy rate in Bengaluru and Hyderabad has declined (although marginally) for the first time since pandemic
- Enterprise demand maintained the momentum; 11,000+ seats leased in Q3, continued focus on CAPEX savings and core+flex strategies
