APPD Market Report Article

Delhi

May 26, 2024

Dr Samantak Das, Head of Research, India

2.9%

INR 152

Rents
Rising

Strong quarterly leasing activity; highest among all cities

  • Q1 2024 saw Delhi NCR’s net absorption rising to its highest in four years to 2.26 million sq ft. Gurgaon was the highest contributor to net absorption with a 56% share, followed by Noida having a share of 40%.
  • Similar to the net absorption trend, gross leasing volume rose to 4 million sq ft in Q1, highest among all cities, driven by notable transactions in Gurgaon and Noida. The flexible workspace sector took the lead with a dominant share of 35%, followed by manufacturing at 18% and BFSI at 16%. Flex operators leased more than 6800 seats, driven by demand from occupiers across various industries.

Quarterly supply of 1.68 million sq ft

  • In Q1 2024, new completions reached 1.68 million sq ft taking the Delhi NCR office stock to 151 million sq ft. Majority of the supply (96%) was completed in Gurgaon, followed by Delhi SBD (4%). The average pre-commitment rate in new completions was 31%. Key projects that went operational in Gurgaon included AIPL Signature and Magnum Global Park.
  • The overall vacancy declined by 70 bps q-o-q to 25% in Q1 2024. Supply of around 9 million sq ft is expected to come on-stream by end of 2024, with Gurgaon’s share at 76% and 23% in Noida. Supply is expected to be headlined by prominent developers in prime business districts as well as emerging corridors.

Rents increase in Gurgaon and Noida

  • Transactions in key existing buildings that had lower vacancy levels closed at higher rents, thus pushing overall city rents upwards. New phases of existing buildings saw higher rentals quoted by developers owing to high demand and quality offered in new age buildings. Rents inched up by around 0.9% q-o-q with the highest jumps recorded in some Gurgaon-based office projects.
  • In the future, rental growth is likely to be driven by assets from established developers and institutionally-owned assets, despite the presence of a robust supply pipeline that may bring more options for the occupiers.

Outlook: Demand to be sustained, backed by quality supply

  • Demand is expected to be sustained in 2024 as existing occupiers plan headcount growth and further expansion with return-to-office levels continuing to increase. Additionally, new entrants with fresh space requirement will also lead to increased demand for office spaces.
  • The demand is backed by quality supply, as projects by established developers and institutional owners such as DLF Limited, Bharti Realty, Hines, Godrej Fund Management, AIPL, Max Estates, and Prestige Group are expected to come on-stream. Supply of around 38 million sq ft is expected to go operational in next five years.

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

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