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Delhi-NCR, Hyderabad, Mumbai, and Pune - stood at 14 million sq ft, registering an 11% decline compared to the same period last year. Bengaluru, Delhi-NCR, and Chennai together accounted for two-thirds of the quarterly demand, with the flexible workspace being the leading absorption driver, accounting for 27% of gross absorption.
The IT-BPM and BFSI sectors accounted for 23% and 16% of demand share, respectively. The overall leasing activity witnessed a dip of 11% YoY in Q1 2023, with Hyderabad being the only city to have witnessed strong YoY leasing activity. Hyderabad witnessed leasing activity of around 1.8 million sq ft, corresponding to a strong YoY increase of 50%, with stable rentals across micro-markets.
Moreover, the office space also saw a 31% YoY decrease in new supply infusion in Q1 2023, which stood at 13.1 million sq ft. The maximum supply infusion was witnessed in Hyderabad and Pune, with a cumulative share of over 50%. The total office stock across the top 6 cities stood at 717.1 million sq ft as of Q1 2023, while the overall vacancy levels across the six cities stood at 18.4% during the said period.
Savills India expects gross absorption to reach 48.5 million sq ft in 2023, and annual supply infusion is expected to stand at 61.5 million sq ft by the year-end. While the pandemic-induced remote work culture led to a dip in demand for office space, the reports suggest that the demand will pick up in the coming months with the gradual opening of businesses and resumption of operations. In addition, as the Indian economy is growing, there is an expectation of increased demand for office space.
In conclusion, the Indian office space market has witnessed a decline in demand and new supply infusion in Q1 2023. However, it is expected to pick up gradually, with Hyderabad being the only city to witness strong YoY leasing activity. While the flexible workspace is driving the demand, the IT-BPM and BFSI sectors are the major contributors. With the resumption of operations and the growing Indian economy, the demand for office space is expected to grow in the coming months, and Savills India expects gross absorption to reach 48.5 million sq ft in 2023.
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