APPD Market Report Article

Delhi

May 31, 2022

0.5%

INR 146

Rents
Rising

Healthy gross leasing activity led by flex operators

  • Delhi NCR recorded a net absorption of 1.34 million sq ft in 1Q22, a marginal 5% decline q-o-q. Gurgaon led with a 55% share of net absorption as it recorded some large, prominent transactions. Noida accounted for 43% while Delhi had a share of 2%. The gross leasing activity was much higher, driven by renewals and large-size deals.
  • Quarterly leasing activity was led by flex (27%), telecommunications, healthcare-biotech, real estate and others (25%), and manufacturing (19%). Large-size deals (more than 50,000 sq ft) constituted 52% of the gross leasing activity in the quarter.

New supply of 1.50 million sq ft completed in Noida

  • Total new supply of 1.50 million sq ft was completed in 1Q22 – all in Noida. The completed buildings included Windsor Grande, The Ikon, Trapezoidal IT Park, Stellar OKAS 1425 and Stellar 127 Tower A.
  • By end-2022, 9.5 million sq ft is expected to complete across Delhi NCR. Noida is likely to lead the way with 50% of this new supply, and Gurgaon accounting for 48%.

Rents remain largely stable across Delhi NCR

  • Rents remained largely stable across Delhi NCR and are expected to increase marginally in the second half of 2022 in select submarkets, driven by quality office projects. Also, occupiers prefer green buildings and rents in these buildings already command a premium compared to non-green buildings.
  • Vacancy in Delhi NCR office market stands at 28.1 % in 1Q22; however, in core office corridor areas it is quite a bit less. We expect rents to show growth in such low vacancy submarkets, largely backed by good-quality and well-managed buildings.

Outlook: Uptick in leasing momentum expected in 2022

  • Leasing activity is expected to grow in 2022 as there is pent-up demand, growing confidence amongst occupiers and supply pipeline of high-quality office buildings. Demand for high-quality office buildings is expected to go up and occupiers will take advantage of pre-leasing such superior-grade, upcoming projects by established developers.
  • Net absorption is expected to strengthen and grow by as much as 32% y-o-y. The supply of 9.5 million sq ft is likely to outpace demand in 2022, and vacancy levels may rise marginally. Flex space operators are expected to expand their footprint driven by occupier demand for managed and bespoke office space and the associated flexibility and amenities that come with these spaces.

Note: Delhi Office refers to Delhi NCR's overall Grade A office market.

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