News release

India's office market remains resilient amidst global headwinds: Tech sector dominates gross leasing in Q2

Manufacturing sector witnesses biggest jump Q-o-Q with its share reaching an eight-quarter high

July 10, 2023

Vatsala Sharma

+91 81717 17989
  • India’s office markets stand tall as gross leasing for H1 2023 up by 2.5% to 25.31 mn sq ft compared to the same period a year ago

  • Net absorption (change in the total amount of leased or occupied space in a given market over a specific period) is up 4% q-o-q but is typified by occupiers remaining slightly bearish on big expansion plans given the still swirling global headwinds of economic uncertainty

  • Bengaluru remains the top market in terms of net absorption while Chennai has emerged strongly to take the second spot with a 2.8X growth in net absorption q-o-q, backed by manufacturing and tech segments committing to large spaces

National, July 4, 2023: The gross leasing activity in the top seven cities of India reached 12.7 million square feet in Q2 2023 (April-June 2023), demonstrating a stable market sentiment in comparison to the previous quarter. Additionally, despite the global headwinds, the gross leasing activity in the first half of 2023 increased by 2.5% when compared to the same period in 2022.

Tech sector's share of leasing activity, at 23.1%, remained slightly sluggish but still led in terms of overall share of the quarterly leasing activity, followed by flex with 17.7. The manufacturing sector has begun to witness the positive effects of favorable policies and India's engineering talent, resulting in its share reaching an eight-quarter high. Over the past 10-12 quarters, the manufacturing sector has consistently demonstrated robust leasing activity, accounting for a significant double-digit share of the gross leasing volumes. Chennai showcased commendable progress, primarily driven by substantial space take-up by the manufacturing/industrial and tech sectors. As a result, it climbed to the second spot with a share of 22.2%. Furthermore, Chennai's quarterly net absorption soared to a 15-year high, reflecting its strong performance in attracting occupiers.

For the second straight quarter, Delhi NCR witnessed the highest gross leasing activity in Q2 2023 followed closely by Bengaluru. Both cities accounted for a significant share of 24.7% and 20.8% respectively. Chennai made a significant recovery in market activity accounting for a 18.7% share with Mumbai following at 13.0%.

Gross Leasing (mn sq ft) Q1 2023 Q2 2023 Q-O-Q Change (%) H1 2022 H1 2023
Bengaluru 3.12 2.64 -15.3% 6.46 5.76
Chennai 1.19 2.37 100.0% 3.01 3.56
Delhi NCR 3.99 3.13 -21.6% 7.16 7.12
Hyderabad 0.97 1.37 40.4% 2.00 2.34
Kolkata 0.57 0.49 -13.2% 0.31 1.06
Mumbai 1.50 1.65 10.3% 3.68 3.15
Pune 1.28 1.03 -19.4% 2.06 2.31
Pan India 12.62 12.69 0.6% 24.68 25.31

*Source: Real Estate Intelligence Service (REIS), JLL Research

“The first two quarters of 2023 have witnessed the highest leasing activity compared to the same periods over the past four years. Contrary to predictions, the so-called headwinds effect was not as pronounced, and India has remained a prominent player in the global office market. India boasts the world's leading GCC ecosystem, with approximately 27-30% of India's Grade A stock occupied by GCCs. This sector consistently contributes a significant share to the annual leasing activity across various industries” said Rahul Arora, Head - Office Leasing Advisory, India, JLL.

“The growth in segments such as engineering R&D, emerging technologies, and cutting-edge BFSI solutions and services is expected to generate strong demand in India. The country's abundant and diverse talent pool, cost competitiveness, high-quality real estate, and a successful track record as a leading tech ecosystem have all converged to minimize the impact on India's office markets. As global sentiments improve, these markets are positioned for further growth” added Arora.

“The flight to quality is playing a significant role in driving occupier preferences towards core markets and superior-grade projects. As a result, we are observing higher occupancy levels. Although net absorption in the first half of 2023 was slightly lower compared to the same period in 2022, looking ahead, we anticipate stronger market activity in the second half of 2023, which will contribute to achieving a net absorption level of approximately 36-39 mn sq ft for the full year. Transaction closures will be relevant to the forecasts for 2023 with any slippages likely to keep this year slightly muted but positively impact the years beyond” said Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.

Demand: Net absorption at a three-quarter high

India’s net absorption across its top seven cities broke its six-quarter declining trend by making a minor recovery in Q2 2023. While occupiers do remain slightly bearish on expansion activity, India continues to see growth from its domestic firms and global occupiers spreading their wings albeit at a slightly slower pace.

Leasing activity was led by Bengaluru as the biggest market in terms of net absorption with a 23.5% share. Chennai also witnessed significant activity gains driven by major space take-up by manufacturing/industrial and tech sectors to jump to the second spot with 22.2% share and its quarterly net absorption jumping to a 15-year high. Delhi NCR was third with a 17.1% share, slipping from the top spot it had taken in the past two quarters.

Net Absorption (mn sq ft) Q1 2023 Q2 2023 Q-O-Q Change (%)
Bengaluru 1.91 1.87 -2.1%
Chennai 0.63 1.76 181.6%
Delhi NCR 1.96 1.36 -30.7%
Hyderabad 0.52 0.88 68.3%
Kolkata 0.46 0.33 -27.7%
Mumbai 0.88 0.98 11.0%
Pune 1.28 0.76 -40.5%
Pan India 7.65 7.95 4.0%
Supply: Quarterly supply at 10.49 mn sq ft; up by 5.3% q-o-q

In Q2 2023, 10.49 mn sq ft of new completions were recorded, marginally up by 5.3% Q-o-Q as compared to the previous quarter. Hyderabad dominated with a 47.2% share of new completions, followed by Bengaluru with a 22.0% share. With Chennai accounting for a 12.7% share, the three south and tech gateway cities accounted for 81.9% share of quarterly new completions. Only 23% of the new supply had already been committed, which reflects the current uncertain and bearish business environment. Delhi NCR had a pre-commitment rate of 37% followed by Bengaluru with 28% and Hyderabad at 23%. Pune had a pre-commitment rate of 17% while Chennai just had 10%.

New Completions (mn sq ft) Q1 2023 Q2 2023 Q-O-Q Growth (%)
Bengaluru 4.75 2.31 -51.4%
Chennai 0.70 1.34 90.9%
Delhi NCR 1.81 1.06 -41.4%
Hyderabad 0.68 4.95 632.6%
Kolkata 0.04 0.00 -100.0%
Mumbai 0.15 0.14 -10.0%
Pune 1.83 0.70 -61.6%
Pan India 9.96 10.49 5.3%

Vacancy Trends

Pan-India vacancy witnessed a marginal drop of 10 bps q-o-q to 16.6%. Also, vacancy in the near term is expected to remain sticky within the range of 16-17%. The future supply pipeline remains strong while the leasing momentum is showing resilience, which bodes well for the office sector when market sentiment improves. With moderate to strong pre-commitments in upcoming projects and expectations of leasing activity picking steam by H2 2023, net absorption numbers are expected to remain strong and keep vacancy within a tight range.


India's office markets have demonstrated remarkable resilience, maintaining a consistent level of quarterly leasing activity throughout the first two quarters of 2023, led by Tech and Flex. Additionally, other office segments such as manufacturing/industrial, life sciences-pharma-healthcare, and businesses targeting the strong consumption market in the country are expected to contribute to the ongoing market activity.

Although global headwinds and sluggishness in the tech sector continue to pose challenges, India's resilience over the past six months is expected to persist throughout the remainder of the year. Despite these limiting factors, India's office markets have shown strength and are poised to navigate the current landscape with resilience.

**Net absorption is calculated as the new floor space occupied less floor space vacated. Floor space that is pre-committed is not considered to be absorbed until it is physically occupied.

*Gross leasing refers to all lease transactions recorded during the period, including confirmed pre-commitments, but does not include term renewals. Deals in the discussion stage are not included

About JLL

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