Delhi NCR office leasing volume drops 27% to 2.9msf in Q1

Fresh leases accounted for 86% of the activity during the quarter.

According to a report by Cushman and Wakefield, Delhi NCR recorded leasing volumes of approximately 2.9 msf in Q1, which sits in alignment with the recent 8-quarter average of 3.0 msf, showing that the leasing volumes appear more or less consistent. 

However, the report said this was still a decline of 27% q-o-q and 9% y-o-y. The leasing activity in Q1 23 is also 18% lower in comparison to the quarterly average of the past 6 quarters. 

Here’s more from Cushman and Wakefield:

Fresh leases accounted for the majority of demand with a share of 86%, followed by 12% share of term renewals. This quarter’s leasing was led by the IT-BPM sector with 22% share, followed by flexible workspaces and engineering & manufacturing sectors with 15% share each in GLV. Flexible workspace operators continue to take-up space in Gurgaon and Noida markets. 

Gurugram accounted for the majority of leasing activity with 72% share, led by submarkets such as Golf Course Extension Road, NH8–Prime, and Sohna Road; Noida on the other hand, accounted for 25% share of the leasing activity. On a net absorption basis, Delhi NCR recorded 1.65 MSF of space take-up during this quarter, a drop of 35% q-o-q, though this was 27% higher on a y-o-y basis.

Reasonably good supply addition in Q1 2023; strong pipeline of upcoming supply 

In Q1-23, Delhi NCR witnessed 1.6 msf of new supply, which is somewhat lower when compared to an average quarterly supply of 1.9 msf recorded in the year 2022. However, on a q-o-q basis, there is a marginal growth of 4% in new supply addition. 

Bulk of the first quarter supply was seen in Noida Expressway, while South East Delhi also saw operationalization of one Grade A project. Certain projects that were slated for completion during this quarter have been deferred due to delays in obtaining occupation certificates. 

Approximately 22.19 msf of new supply is under various stages of construction and slated for completion during 2023-2025 period, of which nearly 60% will come in submarkets such as Golf course Extension Road, Golf course Road, Southern periphery road and NH 8 Prime in Gurgaon. Close to 27% of this future supply will be coming in Noida across locations like Noida Expressway and Noida city 1 region. 

Vacancy levels drop marginally; Rentals witness a slight increase 

Overall city wide vacancy rate declined marginally by 40 basis points on a qoq basis and over one percentage point when compared to the same period, last year, likely because of limited new supply during the quarter. City level rentals witnessed 0.5% growth on qoq basis and an increase of 1.1% was witnessed when compared to the same period last year.