Bengaluru office market sees 28% dip in demand and 25% decrease in supply: Vestian report

Bengaluru's office market witnessed a notable downturn in demand during the July-September period, with a 28 per cent decline in gross leasing of workspace and a 25 per cent dip in new supply, according to the latest report from real estate consultant Vestian. The data, released on Monday, highlighted the subdued demand from corporates in the region.

In Bengaluru, the absorption of office space fell from 5 million square feet to 3.6 million square feet year-on-year during the third quarter of 2023. Simultaneously, new office supply in the city declined by 25 per cent, reaching 2.7 million square feet.

Vestian anticipates a potential rebound in office demand in Bengaluru, especially with large IT companies deciding to call their staff back to the office. This expectation aligns with the broader trend seen across India's top seven cities, where Vestian data revealed a 21 per cent increase in gross office space leasing, totaling 15.9 million square feet in July-September 2023 compared to 13.11 million square feet in the same period the previous year.

Apart from Bengaluru, the other major cities covered in the report are Delhi-NCR, Mumbai, Chennai, Kolkata, Pune, and Hyderabad. New supply across these cities increased by 26 per cent to 13.4 million square feet during the reviewed quarter.

Commenting on the report, Shrinivas Rao, CEO of Vestian, highlighted the heightened real estate activities in the Indian office sector during Q3 2023. He noted that absorption reached the highest level since the pandemic, and new completions reached a five-quarter high. The office market also reported healthy vacancy levels and an appreciation in average rentals, indicating robust fundamentals and a healthy demand for quality office spaces in India.

The data further revealed trends in other cities, such as a 14 per cent decline in gross leasing of office space in Delhi-NCR, an 82 per cent increase in leasing transactions in Chennai, a nearly four-fold jump in office space leasing in Hyderabad, a 21 per cent rise in office space leasing in Mumbai, an 83 per cent increase in office leasing in Pune, and growth in office space leasing in Kolkata.

Rao emphasized that the key office markets in southern cities commanded the highest share of pan-India absorption and new completions. He expects rentals to rise in these cities due to renewed demand as many large conglomerates are calling their employees back to the office.

The IT-ITeS sector dominated leasing during the July-September period, accounting for a 25 per cent share, while the BFSI sector contributed 20 per cent to the total absorption. Manufacturing & Engineering and Flexible Space sectors accounted for 17 per cent and 16 per cent, respectively, in Q3 2023.

(With PTI inputs.)