Office demand skyrockets 92% in Q4 2023: Colliers

Office space frenzy: Office space demand experienced a surge of 92 per cent in the October-December period across the top six cities, according to a report from Colliers India. The data revealed that gross leasing of office space reached 20.2 million square feet in the fourth quarter of the current calendar year, a significant rise from 10.5 million square feet in the same period the previous year.

Bolstered by robust demand in the final quarter, the overall leasing of office space witnessed a 16 per cent increase, totalling 58.2 million square feet throughout the 2023 calendar year, compared to 50.3 million square feet in the preceding year. Colliers monitors office demand and supply in six major cities, like Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.

City-by-city surge

The figures indicate a surge in office space leasing across these cities. Bengaluru saw a notable 58 per cent increase, reaching 5.5 million square feet in the October-December period, up from 3.5 million square feet in the corresponding period the previous year. Chennai experienced a more-than-fourfold rise, reaching 4.3 million square feet from 1 million square feet.

Delhi-NCR observed a 61 per cent growth in demand, with office space leasing increasing to 3.1 million square feet from 1.9 million square feet. Hyderabad recorded a 57 per cent increase, reaching 2.7 million square feet from 1.7 million square feet. Mumbai witnessed an 87 per cent surge, with demand reaching 2.6 million square feet from 1.4 million square feet. In Pune, office leasing doubled to 2 million square feet in the October-December period of the current year, compared to 1 million square feet in the previous year.

Optimistic outlook

Arpit Mehrotra, Managing Director, Colliers India, commented on the robust performance of the country's office market, surpassing expectations with a gross absorption of 58 million square feet in 2023. He expressed optimism, stating that the momentum in demand, particularly in the last quarter, sets the stage for a positive start in 2024. Despite unforeseen events, Mehrotra highlighted the stable economic outlook and predicted continued interest in Indian commercial real estate from both domestic and foreign occupiers.

The report also highlighted shifts in demand drivers for 2023. The tech sector's contribution to office leasing has decreased steadily from 50 per cent in 2020 to 25 per cent in 2023. Meanwhile, the BFSI (Banking, Financial Services, and Insurance) and Engineering & Manufacturing sectors have nearly doubled their contributions, rising from 10 per cent to 12 per cent in 2020 to around 16 per cent to 20 per cent in 2023. Notably, in 2023, engineering and manufacturing players surpassed technology firms in Bengaluru, with a 26 per cent share compared to a 22 per cent share.

Flexible space operators also experienced a 24 per cent increase in demand, reaching 8.7 million square feet in 2023, indicating a growing trend in flexible workspace solutions.