APPD Market Report Article

Delhi

November 29, 2022

Dr Samantak Das, Head of Research, India & Sri Lanka

1.0%

INR 147

Rents
Rising

Net absorption increases by 22% q-o-q

  • In 3Q22, net absorption was recorded at 1.6 million sq ft, an increase of 22% on a quarterly basis and 15% on a yearly basis. It was driven largely by pre-commitments in a new completion in Gurgaon. Gross leasing was higher, at 2.48 million sq ft, with many churn deals and some pre-commitments in upcoming supply.
  • Gurgaon accounted for 76% of the quarterly net absorption, with Noida following with a share of 21%. IT/ITeS, flex providers, manufacturing and BFSI were the major contributing occupier sectors to leasing activity. More than 5,000 seats were also leased by enterprises from flex space operators in 3Q22.

Addition of 3.55 million sq ft to Grade A office stock

  • Six new office buildings, totalling 3.55 million sq ft, were completed in 3Q22, taking Delhi NCR’s total stock to 142.5 million sq ft. Gurgaon saw the bulk of these completions with a 95% share while the rest were in Noida. The completions included two towers of DLF Downtown in Gurgaon that were 95%-100% pre-committed.
  • Vacancy increased by 70 bps q-o-q to reach 28.5%, led by new completions in select corridors that had no pre-commitments. In 2022, 9.68 million sq ft of supply is expected to be completed for the full calendar year.

Rental growth driven by new completions

  • Rents increased marginally in a few quality office buildings with limited vacancy levels. It also increased in some submarkets due to the completion of prime office projects coming on stream at higher rents.
  • Rents are expected to increase, further driven by office projects and portfolios that have low vacancy and that are owned by established developers and institutional landlords.

Outlook: Upbeat occupier sentiment to support robust leasing

  • Robust leasing activity is expected in the next six months in both conventional office workplaces as well as flex spaces. Managed office space will continue to see increasing demand from big enterprises and new-age occupiers.
  • In the medium term, around 38.5 million sq ft of supply is expected across Delhi NCR between 2023 to 2026. With occupiers in an active state, healthy net absorption of around 29 to 30 million sq ft has been forecasted in the same period. Occupiers are expected to follow a hybrid real estate strategy. However, physical office space will likely remain central to their overall workplace strategy.

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

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