India's Office Market Sees Slowdown in Leasing Due to Premium Space Shortage
Quick Look
- India's office leasing activity slowed in Q2 due to a shortage of premium spaces, with gross leasing down 1% and net leasing down 14.5%.
- Despite this, occupier demand remains resilient, driven by global companies' confidence in India's talent and growth prospects.
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Why It Matters
India's office market experienced a slight dip in leasing activity during the April-June quarter due to a scarcity of premium office spaces. Despite this, overall demand remains robust.
India's office market remained active during the April-June quarter, but a shortage of premium office spaces slowed leasing activity across the country's biggest property markets, a report by Cushman & Wakefield has highlighted.
The real estate consultant said that gross leasing of office spaces across eight major cities slipped 1% year-on-year to around 21 million sq ft during the quarter. Net leasing, which reflects the change in occupied office space, fell at a sharper pace of 14.5% to 11.6 million sq ft.
The report covers Mumbai, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Ahmedabad and Kolkata.
Cushman & Wakefield said the decline in net leasing was mainly due to the limited availability of high-quality office spaces. While net absorption measures the increase in occupied office stock between two periods, gross leasing captures the overall level of market activity by including fresh leasing, pre-leasing as well as renewals signed in the open market.
Despite the moderation in leasing, the consultant said occupier demand continues to remain resilient.
"While global macroeconomic and geopolitical uncertainties have led occupiers to adopt a more measured approach to decision-making, the underlying demand story remains firmly intact," said Anshul Jain, Chief Executive – India, SEA, MEA & APAC Office and Retail, Cushman & Wakefield.
He said global companies continue to make long-term commitments to India, underlining their confidence in the country's talent ecosystem, business environment and long-term growth prospects.
"Global capability centres continue to be at the heart of this momentum, with their expansion increasingly shaping demand across multiple office markets," Jain said.
Explaining the supply situation, Jain said developers had largely focused on residential projects over the past few years as housing demand remained strong.
"However, with office vacancy tightening to post-pandemic lows, rental growth strengthening and demand remaining resilient, we expect commercial development activity to regain greater attention," Jain said.
He added that expanding the pipeline of new office projects would be important to support the sector's next phase of growth.
What to Watch
AI outlook — possibilities, not facts
Commercial development activity will regain greater attention.
Likely · Medium term
Open Questions
- When will new premium office spaces become available?
- What specific global factors are causing occupier caution?
