Delhi office leasing activity up 7.4% to 3.4msf in Q2

Net absorption also increased 1.2% to 1.3msf during the quarter.

Office leasing in Delhi NCR was robust in the second quarter of 2022, recording a 7.4% q-o-q growth to 3.42 million square feet (msf). 

According to Cushman & Wakefield, gross leasing in H2 2022 recorded a 1.7X increase compared to H1 2021, signalling higher occupier confidence in office space uptake. IT-BPM and professional services led the quarter’s leasing with 18% share each, followed by engineering & manufacturing with a 14% share. 

Here’s more from Cushman & Wakefield:

Flexible workspace operators continued to lease spaces in the city to cater to the buoyant demand for such spaces, including enterprise clients. Large developers are also open to leasing spaces to flex operators in their projects, amidst the demand from corporates. 

Fresh leasing accounted for a majority share of 86% in the quarter’s leasing as occupiers expanded and consolidated office spaces. Term renewals constituted 10% of the quarter’s leasing. 

Gurugram constituted a majority share of 65% in the quarter’s overall leasing in NCR, led by micro-markets including Golf Course Extension Road, Cyber City, NH8 – Prime. Noida Expressway led the leasing in Noida and deals included large transactions by flexible workspace operators. 

The quarter recorded a net absorption of 1.32 msf, a marginal increase of 1.2% on q-o-q comparison. With more employees now returning to work gradually, office demand receives a fillip. 

Moderate supply addition in Q2; small reduction in city vacancy levels 

Noida Expressway and NH-8 Prime micro markets cumulatively recorded new supply addition of 0.93 msf during the quarter, divided equally between the two markets. Overall vacancy level declined by 51 basis points q-o-q on the back of strong leasing demand. Core markets with single digit vacancy levels also witnessed a q-o-q decline in vacancy amidst high occupier demand for such locations. 

While city level vacancy dips by 50-60 basis points, it remains moderately high at 26% attributable to high vacancy in strata sold stock in peripheral locations. City-level market rents remained stable, though select projects with strong leasing traction saw a slight increase in rents. 

Supply pipeline remains strong; core markets to see new supply in coming years 

The core area of Cyber City is expected to add new space in the coming quarter with significant pre-commitments by key occupiers. Along with Cyber City, Golf Course Road and NH-8 Prime are other prime Gurugram areas to see addition of new supply in the next couple of years. This quality space addition will lend significant impetus to the region’s commercial real estate activity. 

Overall, Delhi NCR is expected to add new supply of 20 – 23 msf till 2024, with micro-markets including Golf Course Extension Road and Noida Expressway accounting for a large portion of this addition. Both these locations are witnessing good traction as several multinational firms have been transacting spaces on a consistent basis in these areas.