Office Market Update: Q3 2021

The gross leasing volume (GLV) touched 6.3 million sq ft during the quarter, an increase of 25% q-o-q, which indicates a sustained resurgence in demand. The demand picked up following the economic recovery. The country’s economic activity resurgence was evident in the third quarter of 2021, aided by the government’s aggressive measures to curb the virus and mass vaccination drive. The quarter witnessed a net absorption of 5.86 million sq ft of Grade A office space across the top seven cities in India, up by 48% q-o-q and highest in the year 2021.

The Q3 net absorption was also indicative of improved market sentiments and growing confidence among occupiers. Even in absolute terms, Q3 net absorption is slightly better than Q3 2020, up by 8% y-o-y. On a YTD basis, net absorption at 15.05 mn sq ft in 2021 was lower by 13% compared to the same period for 2020.

Completions remained robust at 10.9 mn sq ft in Q3 2021, albeit lower by 7% q-o-q. New completions for YTD 2021 were recorded at 36 mn sq ft, an increase of 53% y-o-y. On a q-o-q basis, rentals across the major office markets saw limited movement. Landlords/developers remained accommodating towards occupier needs but reducing the headline rent was not a preferred tool beyond a point. Net absorption for 2021 is likely to be nearly flat or slightly below the 25.6 mn sq ft achieved in 2020.

With India crossing the milestone of one billion COVID-19 vaccinations and caseload remaining under control, office space leasing will likely gather momentum in the coming quarters. Demand is likely to show green shoots through 2022 as business plans become firmer. India’s office market is poised for growth, given the growing traction in the tech industry as corporates increase their tech spending and undergo digital transformation.