New Delhi gross office leasing jumps 55% to 3.18msf in Q1

This is the second highest quarterly leasing since the pandemic hit.

Gross office leasing in Delhi NCR surged 55% y-o-y to 3.18 million square feet (msf) in the first quarter of 2022. According to Cushman & Wakefield, this is the second highest quarterly leasing since the start of the pandemic. 

The growth was led by professional services and e-commerce segments with respective shares of 17% and 13%. Healthcare & pharma was another sector that recorded traction with a 11% share in leasing. 

Here’s more from Cushman & Wakefield:

Fresh leasing, including expansion and consolidation by occupiers, constituted 91% share of the quarter’s leasing. Precommitments formed 7% of quarterly leasing. Flexible workspaces have seen renewed interest by occupiers with healthy occupancy levels. Both co-working and managed workspace are seen favourably by occupiers, including large enterprises. 

Gurugram led this quarter’s leasing with a 63% share and core markets within Gurugram constituted a significant 40% share in overall leasing. Noida Expressway was the other prominent micro-market with a 21% share in overall leasing. A third of the quarter’s leasing consisted of large transactions (above 100,000 sf) across micro-markets in Gurugram and Noida with some occupiers also locking hard options for future expansion plans. 

Employee wellness remained a high priority for corporates which drove leasing momentum in well-managed and quality buildings. Net absorption for Q1 was recorded at 1.3 msf, a slight reduction of 7% on a q-o-q comparison. Strong demand fundamentals with large space take-up by even new age firms is likely to keep Delhi NCR’s office space on a strong footing in the quarters ahead.

Healthy supply addition in Q1; vacancy levels decline marginally The city recorded a supply addition of 1.6 msf during the quarter, largely across the micro-markets of Noida. Majority of this supply addition was in Noida Expressway. Despite the high additional supply, overall vacancy level declined by 10 basis points q-o-q as demand remained strong. Core markets continued to have tight vacancy levels, largely in single digits, which declined during Q1 on the back of strong demand.

The overall vacancy level of 26.6% was mainly on account of relatively limited traction in strata sold buildings, particularly in the peripheral markets of Gurugram and Noida. City-level market rents stabilised as demand has picked pace with improved occupier confidence. 

Strong pipeline of upcoming supply, accelerated execution in select projects in the city More than half of the supply pipeline of 20 – 25 msf scheduled for completion over the next 3 years is likely to be added in two key micro-markets of Golf Course Extension Road and Noida Expressway. A few marquee developments across both these markets are already witnessing accelerated construction activity in expectation of leveraging from traction in the office sector.

The core area of Cyber City is expected to add new space in the year ahead with significant pre-leasing already in place. Engineering & manufacturing and professional services segments are likely to be important demand drivers for office space in the coming quarters.