Indian Real Estate Market Q1 2023

State of the Office Sector

• India’s net absorption across its top seven cities slipped to its lowest in six quarters at 7.63 mn
sq ft. A combination of slower expansion activity, deferred space plans & space contraction with
hybrid workplace strategy still evolving, consolidation/relocation to save on real estate costs
and lesser pre-commitments in new completions are reasons for this.
• Delhi NCR retained its top spot in terms of net absorption for the second quarter in a row with a
25.7% share, with Bengaluru a close second with a 25.0% share. Pune jumped to third spot with
a 16.8% share in the quarterly net absorption, supported by healthy pre-commitments in new
completions.
• Bengaluru dominated the new completions in Q1 2023 with a share of 47.7% followed by Pune
and Delhi NCR with 18.4% and 18.1% share, respectively. These three cities accounted for nearly
84% of quarterly new completions.
• The Pan-India vacancy remained unchanged at 16.6% on a q-o-q basis, with supply and demand
keeping pace with each other.
• While tech remains the biggest occupier category by activity, its shine was dulled with its share
slipping to its lowest post-pandemic as sluggishness in hiring and global headwinds have seen
real activity from the segment slow down. Coworking was second while a big jump was seen in
the BFSI and Consulting segments in the quarterly leasing activity.
• On a q-o-q basis, rents across the major cities barring Hyderabad and Kolkata continued to show
an upward trend with q-o-q growth of 0.2%-0.7%, with Bengaluru showing the maximum growth.

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In d i an Re al E s t at e M ar k e t Q1 20 2 3
Market Overview 1Q09
 State of the Office Sector
India’s gross leasing activity across the top seven cities was recorded at 12.8 mn sq ft, better than the quarterly run
rate of 2022 but marginally down by 8.7% q-o-q. It stood higher on a y-o-y basis by 23.2%, indicating that the
talked-of headwinds’ impact is yet to manifest itself, though the sluggishness in tech visibly continues. India’s net
absorption across its top seven cities slipped to its lowest in six quarters at 7.63 mn sq ft. It is symptomatic of a
corporate world struggling with impending global headwinds and once again an uncertain business environment.
Net supply of 8.63 mn sq ft was recorded in Q1 2023, led by Bengaluru and Delhi NCR. On a q-o-q basis, net supply
was down by 19.4%. Tech accounted for a 22.3% share of the quarterly leasing activity, its lowest in the post-
pandemic period, as headwinds around tech have impacted activity in this segment. On a q-o-q basis, BFSI and
Consulting firms were big movers seeing a significant jump in their market shares to 17.5% and 14.0%, respectively.
Flex continues to see positive momentum with a market share of 17.8%, making it the second biggest contributor to
gross leasing during the quarter.

India’s net absorption at a six-quarter low, headwinds and once again an uncertain business
though occupier activity sustains in Q1 2023 environment.

India’s net absorption across its top seven cities slipped Delhi NCR retained its top spot in terms of net absorption
to its lowest in six quarters at 7.63 mn sq ft. A combination for the second quarter in a row with a 25.7% share, with
of slower expansion activity, deferred space plans & Bengaluru a close second with a 25.0% share. Pune
space contraction with hybrid workplace strategy still jumped to third spot with a 16.8% share in the quarterly
evolving, consolidation/relocation to save on real estate net absorption, supported by healthy pre-commitments
costs and lesser pre-commitments in new completions in new completions. The above three cities also saw net
are reasons for this. They are also symptomatic of a absorption improve q-o-q as well. Kolkata also saw a big
corporate world struggling with impending global jump with its quarterly net absorption jumping to a five-
quarter high.

Figure 1: Supply to remain robust with demand to remain growth-bound

25%

60
58.3
57.6

56.6

20%
53.0

50
50.0
49.8
New Supply / Absorption (million sq ft)

43.8
42.9
47.9
43.0

40
42.6

15%
41.5

39.9

Vacancy %
39.5
38.2
37.9
37.2

37.2
35.9
35.1

35.0
34.9

32.7

30
32.2

31.0

30.8
30.5

29.0
28.9

10%
27.3

26.2
25.6

20

5%
10

0 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
New Supply Net Absorption Vacancy

Note: Figures cover India’s seven metropolitan cities – NCR-Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata and Pune
Source: Real Estate Intelligence Service (JLL), 1Q23

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In d i an Re al E s t at e M ar k e t Q1 20 2 3
Market Overview 1Q09
In occupier activity terms, tech accounted for a 22.3%
share of the quarterly leasing activity with coworking
exhibiting continued momentum with a market share of
17.8%, making it the second biggest contributor to gross
leasing during the quarter.
On a q-o-q basis, BFSI and Consulting firms were also big
movers seeing a significant jump in their market shares to
17.5% and 14.0%, respectively.
The vacancy rate remained unchanged q-o-q at 16.6%.
New completions in the quarter were driven by Bengaluru
with 4.8 mn sq ft of completions, and Delhi NCR and Pune
with around 1.8 mn sq ft each in Q1 2023. With project
withdrawals on account of stock downgrades or changes
in project usage, net supply for the quarter stood at 8.63
mn sq ft, down by 19.4% q-o-q.
Heavy supply pipeline across all major cities with
Hyderabad and Bengaluru leading the way
With a strong supply pipeline in the coming years,
vacancy is likely to remain sticky and show some
elevation over the forecast period. However, a continued
strong momentum towards space take-up from global
firms with India as a key offshoring destination and
growth coming from domestic forms as well, demand
resilience is expected to sustain.
There is also an ongoing flight-to-quality trend with
occupier activity moving towards institutional and big
landlords who are focused on creating sustainable and
healthy workspace. Annual supply is likely to be around
55-58 mn sq ft each year through 2023 to 2025. (Figure 2).
Hyderabad is likely to account for the highest share of
upcoming supply in the medium term (2023-25) with
around 47.2 mn sq ft forecasted, which is likely to create
a supply overhang in certain corridors. Bengaluru is also
expected to see around 42.0 mn sq ft of supply which is
lined up for completion, while Delhi NCR and Mumbai are
likely to see around 22-25 mn sq ft each of new supply
additions over the same period.
Pune and Chennai are likely to see around 20.0 mn sq ft
and 16.6 mn sq ft, respectively of new supply over the
2023-2025 period.
In d i an R e al E st at e M ar k e t Q1 20 2 3
Market Overview 1Q09
Net absorption projections for 2023-25 to be driven by
Hyderabad and Bengaluru
While net absorption for Q1 2023 was down to a six-
quarter low, existing pre-commitments and ongoing and
upcoming occupier demand are expected to keep net
absorption at healthy levels and higher than the pre-
COVID 5-year average. In fact, net absorption through
2023-2025 is expected to be higher y-o-y for each
successive year.
For the medium term, net absorption is forecasted to be
driven by the tech-driven markets of Bengaluru and
Hyderabad with both expected to see around 31.4 mn sq
ft and 31.2 mn sq ft, respectively. Mumbai and Delhi NCR
are likely to see net absorption numbers of around 17-18
sq ft each. Pune and Chennai are also expected to see net
absorption numbers of around 14-15 mn sq ft and 12-13
mn sq ft, respectively for the period of 2023-25.
Vacancy rate remained unchanged q-o-q at 16.6% in
Q1 2023
The Pan-India vacancy remained stable q-o-q in Q1 2023,
with supply keeping pace with demand. Vacancy going
forward as well is expected to remain sticky within this
range of 16-17% in the near term.
The supply pipeline is strong, and while leasing
momentum is slightly lagging, moderate to strong pre-
commitments in the upcoming projects and expectations
of leasing activity to pick up steam by H2 2023 will
support the net absorption projection and keep vacancy
within range.
Vacancy in Bengaluru stood at 13.0%, up 90 bps q-o-q.
With a substantial supply pipeline, the vacancy is
expected to remain in the 13-4% range in the medium
term.
Vacancy in Mumbai fell to 13.5%, down for the fourth
straight quarter by 50 bps q-o-q. The vacancy in the city is
forecasted to be around 14-15% in the next 3 years.
NCR saw its vacancy fall by 40 bps q-o-q to 27.7%. Despite
healthy demand, headline vacancy is expected to remain
between 27-28%, largely due to strata-titled projects and
peripheral markets contributing to this high vacancy
number.
3
Vacancy in Chennai rose to 10.7%, flat q-o-q. With some
vacancies expected to enter the market and a healthy
supply pipeline, the vacancy forecast is around 12-13%.
Hyderabad saw its vacancy at 21.0%, unchanged q-o-q.
With a significant supply pipeline, vacancy levels are
expected to further rise to between 23-25%, creating a
supply overhang in the medium term.
Vacancy in Pune rose to 8.3%y, up 60 bps q-o-q. With a
heavy supply forecast, vacancy is expected to remain
sticky between 11-12%.
Vacancy in Kolkata was 20.0%, down by 150 bps q-o-q.
With a slowly recovering demand and limited supply,
vacancy is likely to remain between 22-23% over the next
three years.
In the IT category, Bengaluru and Hyderabad are
anticipated to inject the highest supply with 31.2 mn sq ft
and 28.7 mn sq ft, respectively. They are followed by Pune
and Delhi NCR with near identical 11.2 and 11.1 mn sq ft,
each.
Hyderabad will be the leading provider of IT SEZs in the
forecast period – supplying 11.4 mn sq ft during 2023-25.
Bengaluru is expected to see SEZ supply of 7.8 mn sq ft
followed by Chennai at 5.6 mn sq ft. It is likely that some
or most of this upcoming IT SEZ supply may get converted
to IT with the coming of the new SEZ Bill. This bill is likely
to make denotification easier while allowing for domestic
firms to use such built-up space post that, giving a fresh
lease of life to SEZ projects.

The contribution of Non-IT supply is also quite healthy

Though the overall vacancy may look slightly higher, core
(Figure 3). The Non-IT supply at a pan-India level for 2023-
office markets in the major cities continue to have tighter
25 is 45.4 mn sq ft as compared to 102.9 mn sq ft of IT
vacancies compared to the respective city’s overall
Parks and 28.0 mn sq ft of IT SEZ. Mumbai, Delhi NCR and
numbers.
Pune are anticipated to inject non-IT supply of 17.5 mn sq
ft, 9.0 mn sq ft and 7.3 mn sq ft. respectively, while
Figure 2: Forecast supply and absorption of office
Hyderabad is expected to see 7.1 mn sq ft of non-IT supply.
space
2023 2024 2025 Total
NCR-Delhi Supply 7.0 6.7 8.1 21.8 Figure 3: Future supply of IT, IT SEZ and Non-IT
Net Absorption 5.7 4.8 6.5 17.0 projects (2023-25)
Mumbai Supply 8.3 7.2 9.4 24.9 City IT Park IT SEZ Non IT TOTAL
Net Absorption 4.8 6.2 6.1 17.1 Bengaluru 31.2 7.8 3.1 42.0
Bangalore Supply 15.2 14.9 11.9 42.0
Chennai 10.9 5.6 0.2 16.6
Net Absorption 10.5 11.2 9.6 31.4
Chennai Supply 6.4 5.4 4.9 16.6
Hyderabad 28.7 11.4 7.1 47.2
Net Absorption 4.3 4.5 3.9 12.7 Kolkata 2.4 0.0 1.3 3.7
Pune Supply 6.5 5.9 7.5 20.0 Mumbai 7.4 0.0 17.5 24.9
Net Absorption 4.0 4.7 5.5 14.3 Pune 11.2 1.5 7.3 20.0
Hyderabad Supply 14.9 16.3 16.0 47.2 Delhi NCR 11.1 1.8 9.0 21.8
Net Absorption 9.1 10.8 11.3 31.2
TOTAL 102.9 28.0 45.4 176.3
Kolkata Supply 2.0 0.8 1.0 3.7
Note: Figures are in million sq ft.
Net Absorption 1.0 0.7 0.8 2.5
1. IT projects include STPI-registered units, as well as other office
Note: Figures are in million sq ft projects constructed specifically for IT/ITeS occupiers.
2. IT SEZ projects include projects that come under the SEZ Act, 2005.
Source: Real Estate Intelligence Service (JLL), 1Q23
Source: Real Estate Intelligence Service (JLL), 1Q23
IT supply is the most prevalent in upcoming supply

IT projects are expected to dominate the supply pipeline

in the years to come. With over 58% share of supply
projected over the next three years, IT projects will
dominate the commercial real estate landscape. This is
on account of the dominant tech sector leading the
charge for office space and supply additions being driven
by tech-dominated cities.

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In d i an R e al E st at e M ar k e t Q1 20 2 3
Market Overview 1Q09
 Figure 4: Absorption rate of office space
250 60
Available Stock for Absorption (million sq ft) (Vacant

(Net Absorption as Percentage of Available Stock)

50
200
New Completions in Current Qtr)

Quarterly Absorption Rate (%)

40
Stock from Previous Qtr +

150

30

100
20

50
10

0 0
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
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1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
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1Q18
2Q18
3Q18
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2Q20
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2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
Vacant Stock from Previous Qtr New Completions in Current Qtr Net Absorption Quaterly Absorption Rate

Note: Figures cover India’s seven metropolitan cities – NCR-Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata and Pune.
Absorption Rate in a quarter is the ratio of net absorption in that quarter and available stock (i.e. vacant stock at the beginning of the quarter +
new completions during the quarter).
Source: Real Estate Intelligence Service (JLL), 1Q23
Figure 5: Vacant stock in various cities (1Q23 vs 2023F)

Source: Real Estate Intelligence Service (JLL), 1Q23

Note: Darker circles indicate actual stock and vacancy at end-1Q 2023 and lighter circles indicate forecasted positions at end-2023.

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In d i an R e al E st at e M ar k e t Q1 20 2 3
Market Overview 1Q09
Rents likely to be buoyant, driven by quality
completions in key office corridors

On a q-o-q basis, rentals across the major office markets With a supply overhang, rents in Hyderabad are likely to
barring Hyderabad and Kolkata continued to show an face some headwinds with growth of around 2-2.5%
upward trend with growth of 0.2%-0.7% q-o-q, with annually going forward. Quality supply additions are
Bengaluru witnessing the maximum growth. likely to inject faster rental growth on their account.

On a y-o-y basis, average office rents in the cities of
Chennai, Kolkata and Bengaluru increased by 6.2%, 3.5%
and 3.1%, respectively. Rents in Mumbai were up by 1.6%
and in Delhi NCR and Pune were up by 1.8% and 1.6%
respectively, while rents in Hyderabad grew by 1.3% over
the same period.
Moving forward, rents in Bengaluru are expected to grow
by 2-3% in the medium term given the strength of its
office market with supply lined up across both existing
and emerging corridors.
Rents in Delhi NCR are likely to sustain the current y-o-y
growth rate of around 1-2% over the next three years.
Rents in Mumbai are expected to rise at an average of
under 1% over the next three years, largely on account of
upcoming supply in peripheral markets accounting for a
bigger share.
Rents in Pune are likely to find some momentum with
quality supply infusion with expected growth of 2.5-3%
annually over the next three years.
Space requirements have declined by around 25-30%
compared to a six-month ago period, driven by many real
estate plans being put on hold or deferred indefinitely. We
do expect that while real estate activity is likely to show
visible sluggishness over the coming period, given India’s
leadership position in the global tech ecosystem the real
estate markets are likely to weather the storm. The
growing offshoring story driven by GCCs across various
segments including BFSI, new tech, engineering R&D and
other office segments like flex, healthcare-life sciences
and manufacturing/industrial is expected to aid
upcoming office markets’ activity as well.

Figure 6: Rental Value Index by Constituent Sub-market

RENTS DECLINE
REIS 1Q23 RENTS RECOVERING Rental Value Index
DECLINING SLOWING
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1Q 2023

Bengaluru -16.0% 3.4% 12.1% 4.6% 1.6% 3.0% 7.0% 7.9% 6.4% 5.3% 9.2% 4.4% 1.9% 1.9% 161.1

Mumbai City -33.5% 0.2% 0.9% 1.0% 0.2% -0.6% -1.0% -0.5% 0.5% 0.3% 1.7% 0.4% 0.1% 0.1% 63.6

Delhi City -41.6% 2.2% 3.2% 1.3% 0.0% -0.5% 1.5% -2.3% -1.0% -0.3% 1.2% 1.7% -0.2% -0.1% 60.6

Mumbai Suburbs -31.5% 5.3% 11.4% 1.7% 2.1% 1.5% 1.6% 5.1% 1.6% 3.9% 6.0% 2.8% 1.3% 2.0% 94.2

Gurgaon (Prime) -31.1% 3.2% 11.7% 5.6% 6.1% 5.3% 0.4% 0.6% -0.9% 0.3% 2.1% 0.0% 0.4% 0.0% 90.4

Gurgaon (Off Prime) -38.2% -2.4% 9.8% 4.4% 2.1% 2.0% 4.2% 1.8% 7.3% 1.4% 1.4% 2.1% 0.0% 0.8% 82.2

Noida -16.2% -10.8% 2.7% 2.6% 2.6% -0.2% 4.9% 3.2% 4.0% 0.3% 5.4% 3.4% 3.5% 3.9% 103.9

Chennai -16.8% 0.0% 6.4% 6.9% 4.0% 2.4% 3.3% 4.5% 3.6% 6.5% 5.0% 2.7% -0.2% 0.2% 128.7

Pune -21.3% -1.5% 3.5% 8.6% 6.9% 8.5% 11.4% 7.5% 2.6% 7.3% 8.8% 1.1% 1.2% 1.9% 125.9

Hyderabad -25.0% -1.4% 6.9% 5.1% 1.4% 8.6% 6.1% 6.8% 1.8% 5.4% 10.6% 2.2% 2.7% 1.7% 124.0

Kolkata -30.4% 2.4% 5.1% 2.8% -0.3% -0.9% 4.4% 1.7% 2.2% 2.0% 2.0% -0.8% -0.3% 2.4% 84.1

Source: Real Estate Intelligence Service (JLL), 1Q23

Note: Base year for Index is peak of 3Q 2008

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In d i an R e al E st at e M ar k e t Q1 20 2 3
Market Overview 1Q09
 For subscription details and enquiries, please contact:

India

Dr. Samantak Das

Executive Director and Head of Research
Jones Lang LaSalle
tel +91 2271495889
tel +91 9819865516
email samantak.das@ap.jll.com

Rohan Sharma
Senior Director
Research & REIS, India
Jones Lang LaSalle
tel +91 2271495889
tel +91 9910484222
email rohan.sharma@jll.com

India – Tier I India - Tier II India – Tier III

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In d i an R e al E st at e M ar k e t Q1 20 2 3
Market Overview 1Q09