Office Space Demand Surges 92% In Q4, Propelling 2023 Leasing To New Heights

The demand for office space in India experienced a remarkable surge of 92 per cent during the October-December period of 2023, according to a report by real estate consultant Colliers India. This robust growth in demand was primarily driven by increased workspace needs from corporate entities and coworking operators.

As per media reports, Colliers India's report indicates that the gross leasing of office space reached 20.2 million square feet in the fourth quarter of 2023, a substantial increase from 10.5 million square feet during the same period the previous year. This surge in demand during the final quarter contributed to a 16 per cent rise in total office space leasing for the entire 2023 calendar year, reaching 58.2 million square feet compared to 50.3 million square feet in the preceding year.

The data, which tracks office demand and supply in six major cities—Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune—reveals noteworthy increases in leasing activities across these key regions. Bengaluru experienced a remarkable 58 per cent rise, reaching 5.5 million square feet during October-December 2023 compared to 3.5 million square feet in the same period the previous year. 

Chennai saw an exceptional four-fold jump, reaching 4.3 million square feet from 1 million square feet, while Delhi-NCR witnessed a 61 per cent growth, reaching 3.1 million square feet from 1.9 million square feet.

Hyderabad recorded a 57 per cent increase in gross leasing, totaling 2.7 million square feet from 1.7 million square feet, and Mumbai observed an 87 per cent surge, reaching 2.6 million square feet from 1.4 million square feet. In Pune, office leasing doubled, reaching 2 million square feet during the October-December period of 2023 from 1 million square feet in the previous year.

Colliers India also provided insights into demand drivers for 2023, noting a shift in sectoral contributions. The tech sector's contribution to office leasing decreased from around 50 per cent in 2020 to 25 per cent in 2023. In contrast, the BFSI (Banking, Financial Services, and Insurance) and Engineering & Manufacturing sectors nearly doubled their contributions, rising from 10-12 per cent in 2020 to around 16-20 per cent in 2023.

Notably, in 2023, leasing by engineering and manufacturing players surpassed demand from technology firms in Bengaluru, with a 26 per cent share compared to a 22 per cent share. Demand from flexible space operators also rose by 24 per cent, reaching 8.7 million square feet in 2023.

This surge in office space demand and the evolving sectoral dynamics indicate a resilient and dynamic commercial real estate market in India, poised for continued growth in the coming years.