India

Office
Market
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G I N D
G W I N
AUGUST 2023
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OFF

Appreciable uptick in global economy

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Improvement in current global economic outlook since Q1 2023; W
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although still under the clouds D
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0
2
Monetary policy tightening yield results
High food prices caused temporary
9% surge in inflation in July 2023;
expected to normalize with easing
8% of supply constraints

7% +25 bps
+35 bps Repo rate @ 6.5%
+50 bps
6% +50 bps
+50 bps
5% Inflation: +40 bps
8 - yr high RBI tolerance
GDP growth projection for 2023, as estimated in April vs July 4% zone for
Repo rate @ 4.0% inflation
3% Inflation:
GDP growth forecast for 2023 (April estimate) >2 - yr low
7.0
6.6 GDP growth forecast for 2023 (July estimate) 2%
Change in bps
1%
6.0 120
5.2 0%

January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July
0
5.0 5.4
5.2

4.0 2022 2023

3.0
Source: Colliers, Ministry of Statistics and Programme Implementation (MOSPI)
3.0 CPI Inflation (%)
20
Repo rate changes
2.8
1.8 1.7
2.0
20 1.4
20
1.6 0.9 10 The world, especially the economic The IMF in July 2023, estimated a 2023 GDP growth rate of
1.0 1.5
10 0.4 1.3 realities and sectoral implications 3% for the world, a 20 bps upward revision compared
0.8
are ever evolving; clues for future to the April estimates. This comes in the backdrop of
growth prospects needs to be inflation largely easing back to comfortable levels in
0.0 70
analysed continuously. What recent times across countries including India. Steady yet
-0.3 seemed to be a year of continued spaced out hikes in benchmark lending rates have ensured
-1.0 economic vulnerabilities across the that the central bank’s fight against inflation had marginal
world in the beginning of 2023, has impact on consumption and liquidity. The fine balancing
improved relatively. Although, fears act of RBI between inflation and growth has yielded
World India US EU UK China Japan Canada of an imminent slowdown have not results- inflation is largely in check while Q2 2023 GDP
been completely allayed, signs of a growth rate is likely to be strong at 8%. One must however
Source: IMF WEO Jul 2023 & Apr 2023, Colliers comparatively better outlook for note that July witnessed significant spike in inflation due to
Note: EU includes Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Spain, Sweden etc. 2023 and beyond have clearly elevated food prices. These are expected to cool down in
emerged. upcoming months as supply side constraints improve.
 INDIA OFF
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Perceptible change in
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office demand
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Improved economic sentiment to boost occupier activity

With most economies envisaged to perform better in the near-mid term as compared to 3 months ago, the
implications on India’s office market is set to be perceptible for 2023. Gross leasing across the 6 major office
markets is likely to witness considerable traction in the second half of the year.

2023 economic outlook change across regions (Q2 2023 vs Q1 2023)

Deterioration Improvement
United States
China
EU India
United Kingdom
Australia
Saudi Arabia Russia
Japan Canada
S. Korea Turkey Mexico Brazil
Indonesia
Origin centres of office India Office market
50 Considerable Perceptible Marginal Marginal Perceptible Considerable
occupiers in India broad segmentation
(Yearly India office (as per occupier origins) Source: The World Bank, IMF WEO Jul 2023 & Apr 2023, Colliers

demand in mn sq ft) Note: A positive change in projection from IMF’s April to July estimate has been considered an improvement and negative change as deterioration. Economic outlook change has been
further categorised as Marginal, Perceptible and Considerable for 0-40 bps, 41-80 bps and 81 bps or above change respectively. Bubble size represents 2022 GDP of respective
economy.

33
30
Impact on India’s office market demand
25 States
United

Negative change in 2023 outlook Positive change in 2023 outlook

India

Active influencers

Considerable Perceptible Marginal Marginal Perceptible Considerable

Source: Colliers

Passive influencers
2020 2021 2022 H1 2023
US India EU UK Canada Japan Other countries
Other
ies
Countr
ean
Source: Colliers Europ
Note: Origin centres have been arrived at by analysing the leasing data through a broad Union
based framework of occupier profile, operative region, etc . This is used as a proxy to United
om
determine the indicative geographical split of businesses. Kingd
Office demand pertains to Grade-A data only
Others include Switzerland, South Korea, Australia, Singapore, UAE etc. Source: Colliers
 Sectoral gains brighten prospects
Positive movements in sectoral indices reflect in increased occupier demand Manufacturing & Services PMI trend

across the top sectors Services PMI at 13-yr high in July 2023
65

Yearly leasing trend of top occupier sectors 60

55
2020 2021 2022
18 50 Manufacturing PMI at 31–month high in May 2023
16
45
14
Leasing in (mn sq ft)

Service PMI Manufacturing PMI

12 40

November
June

July

October
January

June

July
February

September

January

February
March

April

May

August

December

March

April

May
10
8
6
4 Source: Colliers, IHS Markit India, S&P Global India
2 Note: A reading above 50 indicates an expansion of the sector compared to the previous month; below 50 represents a
contraction; while 50 indicates no change.
0

Sectoral performance (Q2 2023 vs Q1 2023)

Technology Flex space BFSI Engg & Mftg Others
Source: Colliers
Note: Data pertains to Grade A only, Others include Consulting, Healthcare, FMCG, Logistics, E-Commerce etc

BSE sectoral index change* 5% 13% 13%

Technology Engg. & Mftg. BFSI

H1 2023:
24% 18% 17% Source: BSE India
Top demand Technology Flex Space Engg & Mftg *Closing price of March and June 2023 considered for respective sectoral indices
drivers in India (6.0 msf) (4.5 msf) (4.2 msf)

Note: % indicates H12023 demand share, absolute quantum represented in brackets The sectoral indices of BSE also reiterate the
confidence emancipating from critical demand sectors
of commercial realty in India. The QoQ momentum in
leasing activity across dominant sectors (Technology,
BFSI, Flex Spaces and Engineering & Manufacturing) is
likely to continue in H2 2023.

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Positive reaffirmation with respect to the An interesting characterisation of the ~25 mn sq ft N GI
IND C HA
office market outlook also stems from office space uptake in H1 2023, has been the IA OFFICE MARKET -
market sentiments that have been healthy diversification of demand. While leasing activity
throughout 2023. For instance, the services emancipating from US, EU & UK based tech occupiers
PMI reached a 13-year high of 62.3 in July has witnessed a palpable impact in recent times,
2023. Manufacturing PMI, similarly hit a domestic companies especially from the engineering
31-month high in May 2023. In fact, both and manufacturing sector witnessed heightened
services and manufacturing PMI have demand in H1 2023. In fact, 2021 onwards the
been in continuous expansionary mode demand from domestic occupiers has surged
since mid 2021. significantly compared to the global occupiers.
 INDIA O
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Clear signs of positive change

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Top 6 cities show significant demand growth in Q2 after a cautious Q1 W
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India: Sector wise gross absorption growth
(Q2 2023 vs Q1 2023)

72% >100% 50%

Technology Engg. & Mftg. BFSI

City wise QoQ office demand growth Q2 2023 vs Q1 2023

While global as well as domestic signals of improved office market

113% 109% for 2023 are welcoming, strong demand side metrics have already
been established in the second quarter of the year, solidifying the
momentum envisaged in upcoming quarters.
61%
41%
◦ All the 6 major office markets witnessed a growth in demand
19%
5% in Q2 2023 vis-à-vis Q1 2023. Leasing activity in Chennai and
Pune, especially have doubled in Q2 as compared to Q1 2023.

Bengaluru Chennai Delhi-NCR Hyderabad Mumbai Pune ◦ Although the share of demand has been tilting towards flex
spaces in 2023, occupiers from major demand segments
Source: Colliers including technology, engineering & manufacturing, and BFSI
Note: Data pertains to grade A office area leased. segment reported higher quarterly gross absorption in Q2
2023.

Taking clues from the improved macro-economic indicators

worldwide and domestic leasing activity evidences, Colliers
anticipates India office market to conclude on a strong note
in H2 2023, thereby revising the earlier 2023 demand estimate
from 35-40 msf to 40-45 msf. Notwithstanding unforeseen events,
the first half of 2024 is also likely to gather greater steam, taking
help from the current shifting of gears in the India Office Market .
 INDIA OFF
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Office market: spirited push

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in H2 2023
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Heightened demand to push rentals upwards marginally 2023 Office demand forecast (msf)

Vacancy (%) & Rental trend (INR/sf/month)

3.2 3.4 12-14
120 25%
Developers in anticipation of Bengaluru 11-13
115 improved market sentiments are
likely to infuse 40-45 mn sq ft of 1.6 3.3 7-9
110 20%
Grade-A supply in 2023. In fact, the 3-5
Chennai
105 second half of 2023 is expected to
show a 10-20% supply growth as 2.2 3.1 9-11
100 15% compared to H2 2022.
95 Delhi-NCR 7-9
Occupancy levels are set to
90 10% improve in high demand buildings. 1.3 1.5 4-6
Considering the overall demand vs 40-45 msf
85 supply estimates for rest of the Hyderabad 4-6
80 5% year, average rentals in all
likelihood will increase marginally 1.0 1.6 4-6
2020 2021 2022 H1 2023 2023F
across high activity micro markets.
Mumbai 3-5
LHS:WAQ Rent* (INR/sf/month) RHS:Vacancy (%) 35-40 msf
0.8 1.7 4-6
Source: Colliers
Data pertains to Grade A buildings and top 6 cities – Bengaluru, Chennai, Delhi-NCR, Mumbai,
Hyderabad, Pune Pune 3-5
*WAQ is Weighted Average Quoted
Pan India level

Q1 2023 Q2 2023 H2 2023F

Office demand 2023F (March estimate)

Source: Colliers

India office market 2023 outlook

40-45 msf 40-45 msf After a brief slowdown in Q4 2022 and Q1 2023, primarily Domestic companies will increasingly fill the void left by occupiers of
Demand Supply on account of global uncertainties, India's office market foreign origin which usually contemplate longer on real estate portfolio
activity outperformed expectations in Q2 2023. Now, with making decisions in periods of apprehension. Moreover, with most
economic scenario improving across the world, commercial companies advocating work from physical offices in increasing numbers,
real estate is expected to ride the wave of comparatively office market is anticipated to be on the upswing for the foreseeable
16-18% INR 90-100 positive outlook. Perceptible positive change is certain in future. Dynamic real estate requirements, however will continue to
Vacancy per sf/month both demand and supply side parameters. benefit flex operators significantly.
Rent

Source: Colliers
For further information, please contact:
Peush Jain
Managing Director
Office Services | India
peush.jain@colliers.com

Vimal Nadar
Senior Director & Head
Research | India
vimal.nadar@colliers.com

Authors:

Suryaneel Das
General Manager
Research | India
suryaneel.das@colliers.com

Pallavi Kukdolkar
Deputy Manager
Research | Pune
pallavi.kukdolkar@colliers.com

Gruhasree Deevi
Senior Executive
Research | Bengaluru
gruhasree.deevi@colliers.com
Marketing & PR:
Sukanya Dasgupta
Senior Director & Head
Marketing & Communication | India
sukanya.dasgupta@colliers.com
Design & Development:
Satnam Singh
General Manager
Marketing & Communication | India
satnam.singh@colliers.com
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