News release

With post-pandemic Flex leasing at an all-time high of 2.2 mn sq ft, Office net absorption ends Q1 at 11.55 mn sq. ft

Share of the flex segment in total quarterly leasing stood at 21%

March 31, 2022

Arundhati Bakshi Dighe

91 98193 90900

Mumbai, 31 March 2022: The combined office net absorption** across seven cities stood at 11.55 million sq. ft. at the end of the first quarter (January-March) of 2022. According to an analysis published in JLL’s Office Market Update-Q1, 2022, office net absorption was up by a significant 113% year-on-year, clearly indicating the momentum that is now visible in the market.Net absorption was similar to the last quarter due to lingering uncertainties surrounding the Covid-19 pandemic.

Flex hits the high notes

The technology sector continues to be the highest occupier segment in terms of market activity. The flex segment leased 2.2 million sq. ft of space in Q1 2022, the highest since the pandemic broke. This is also more than 50% of the total annual space leased by this segment in each of 2020 and 2021. As a result, the share of the flex segment in total quarterly leasing stood at 21%. The tech segment continued to lead but its share stood at 25%, while the manufacturing/industrial segment, with its share at 17% in the quarterly leasing activity, continues to gain momentum on the back of proactive policy measures. Consulting also saw its leasing share jump to double digits at 13% with BFSI accounting for a 10% share.

“The Gross leasing Volume (GLV) for Q1 2022 was recorded at 10.5 million sq ft, the second-highest in the past 8 quarters. While the Y-o-Y comparison yielded a 40% increase in GLV, the Q-o-Q comparison was lower by 29%. This can be attributed to the fact that most global corporates are awaiting budgetary approvals in the first quarter, which resulted in some transactions missing their closure timelines during the quarter. It is important to note that pre-leasing commitments remain intact and there has been very limited or almost no downsizing by larger corporates during the quarter, indicating the shift in occupier sentiment and greater certainty of business as the pandemic remains under control. Additionally, occupiers also leased over 24,200 seats in the flex segment which has gone mainstream given the change in occupier portfolio strategies centered around flexibility and on-demand spaces,” said Rahul Arora, Head of Office Leasing Advisory, India, JLL

The larger cities of Delhi (27%), Mumbai (18%), Pune (16%) & Bengaluru (15%), together accounted for over three-fourths of the GLV recorded in Q1 2022.

Gross Leasing Volume Q1 2022 (mn sq ft) Q-O-Q Growth (%) Y-O-Y Growth (%)
Bengaluru 1.6 -62% -10%
Chennai 1.4 24% 120%
Delhi NCR 2.9 -8% 44%
Hyderabad 0.9 -69% 24%
Kolkata 0.1 -70% 146%
Mumbai 1.9 31% 16%
Pune 1.7 16% 153%
Total 10.5 -29% 40%

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

Q1 2022 net absorption highest in the last two years

Hyderabad recorded the highest net absorption among the top seven cities, followed by Pune: both surpassed the net absorption in Bengaluru for Q1. Moreover, the cities of Chennai, Hyderabad, and Pune witnessed a healthy growth in net absorption when compared to the previous quarter. Hyderabad and Pune were driven largely by the new completions in Q1 which came on stream with healthy pre-leasing levels.

Office net absorption records healthy growth
Q1 2021 (mn sq ft) Q4 2021 (mn sq ft) Q1 2022 (mn sq ft) Q-O-Q Growth (%) Y-O-Y Growth (%)
Bengaluru 2.38 2.41 1.67 -30.8% -30.1%
Chennai 0.37 0.85 1.21 41.7% 226.7%
Delhi NCR 1.09 1.61 1.34 -17.2% 22.4%
Hyderabad 0.79 2.99 3.42 14.3% 332.7%
Kolkata 0.06 0.47 0.18 -61.1% 234.5%
Mumbai 0.24 1.88 1.44 -23.1% 489.7%
Pune 0.50 1.34 2.30 72.0% 362.3%
Total 5.43 11.55 11.55 0.0% 112.6%

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

Key office micro markets driving the bulk of net absorption
Cities Q1 2022 (mn sq ft) Sub-market with the maximum share in Q1 net absorption
Bengaluru 1.67 ORR – 68%
Chennai 1.21 Guindy – 56%
Delhi NCR 1.34 Gurgaon – 55%
Hyderabad 3.42 Gachibowli – 71%
Kolkata 0.18 Salt Lake – 61%
Mumbai 1.44 Andheri (SBD North) – 30%
Pune 2.30 Kharadi-Hadapsar-Viman Nagar-Baner-Balewadi (East & West SBD) – 68%

“For 2022, we expect Grade A supply of 50-52 mn sq ft to be completed across the top seven cities, with net absorption to be around 36-38 mn sq ft, a 35-40% growth on a year-on-year basis. The current pre-commitment rate for the 12-month forecast supply is 22%. However, when we look at the superior grade supply (institutional and top developers), the pre-commitment rate rises to 35%, clearly signaling the flight to quality assets by major occupiers and the long-term confidence in India and offices remaining central to their workplace strategies,” Dr. Samantak Das, Chief Economist, and Head Research and REIS, India, JLL.

Supply hits highs

Quarterly supply hits an all-time high in Indian real estate; 20 million sq. ft completed in Q1 2022

Completions headlined by Hyderabad, Pune, and Bengaluru
Q1 2021 (mn sq ft) Q4 2021 (mn sq ft) Q1 2022 (mn sq ft) Q-O-Q Growth (%) Y-O-Y Growth (%)
Bengaluru 4.33 2.45 4.63 89.0% 6.7%
Chennai 0.00 0.09 2.40 2566.7% NA
Delhi NCR 4.01 0.35 1.51 330.9% -62.4%
Hyderabad 2.20 2.53 4.77 88.9% 116.9%
Kolkata 0.00 0.10 0.11 10.6% NA
Mumbai 1.96 1.68 1.98 17.6% 1.0%
Pune 0.70 1.93 4.81 149.9% 585.0%
Total 13.21 9.12 20.21 121.5% 53.0%

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

Q1 2022 was witness to the highest ever supply addition in a quarter for the top seven cities combined with 20.21 million sq. ft. The office markets of Hyderabad (23.6%), Pune (23.8%), and Bengaluru (22.9%) headlined new completions in the quarter accounting for about 70% of the total supply addition. Almost 39% of the supply coming on stream in Q1 from these three cities was already pre-committed.

Vacancy up

Given the significantly high completions in Q1 2022, the pan-India vacancy has jumped by 80 bps quarter-on-quarter to 16.1%. Due to a steady pipeline of assets coming on stream, the demand-supply gap has momentarily widened. While the headline vacancy may be a bit disconcerting, core office markets in the major cities continue to have tighter vacancies compared to the city overall numbers.

City Overall City Vacancy % Q-O-Q Change in City level vacancy (bps) Core office sub-market Vacancy %
Bengaluru 11.4% 140 bps SBD ORR - 6.7%
Chennai 10.4% 140 bps SBD OMR - 1.1%
Delhi NCR 28.1% - 20 bps Prime Gurgaon - 10%
Hyderabad 15.8% 60 bps Hitec City - 9.7%
Kolkata 23.3% 10 bps Salt Lake - 22.6%
Mumbai 15.8% 20 bps BKC Core - 6.6%
Pune 8.6% 280 bps SBD East - 7.9%
Looking Ahead

With occupiers back in the market with their real estate plans, active demand currently stands at 36-39 million sq. ft across the top seven cities, now surpassing pre-Covid levels. This active demand is representative of all major ongoing space requirements and deals which are in advanced stages of negotiations and closure.

Given the active demand numbers and pre-commitment rates compared to the upcoming supply, it is likely that demand-supply dynamics should find a balance that allows forecast vacancy to remain within the 15-16% range over the next 12 months as well.

With governments relaxing office occupancy norms across the major cities, return to the workplace has started in the right earnest. While tech companies are slowly bringing workers back to the office, a hybrid model with time split between offices, homes and flex options is likely to be implemented across companies’ basis their own dynamics but will not be a one-size-fits-all solution.

**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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JLL is India’s premier and largest professional services firm specialising in real estate. The Firm has grown from strength to strength in India for the past two decades. JLL India has an extensive presence across 10 major cities (Mumbai, Delhi NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and Coimbatore) and over 130 tier-II and III markets with a cumulative strength of close to 12,000 professionals. The Firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services. These include leasing, capital markets, research & advisory, transaction management, project development, facility management and property & asset management. These services cover various asset classes such as commercial, industrial, warehouse and logistics, data centres, residential, retail, hospitality, healthcare, senior living, and education. For further information, please visit