APPD Market Report Article


February 28, 2023

Dr Samantak Das, Executive Director and Head of Research & REIS, India & Sri Lanka


INR 147


Net absorption reaches 6.16 million sq ft in 2022

  • The office market made a strong recovery in 2022 as net absorption for the full year recorded at 6.16 million sq ft, increasing 31% y-o-y. It has almost reached the five-year pre-pandemic average (2015-2019) of 6.37 million sq ft. Gross leasing for 2022 was 12 million sq ft, driven by pre-commitments and churn deals, and driven primarily by flex operators, followed by tech and manufacturing.
  • On a q-o-q basis, net absorption increased by 17% to 1.88 million sq ft. The majority of net absorption in the quarter was attributable to Gurgaon (58%), followed by Noida with a share of 41%.

Supply of 8.30 million sq ft in 2022

  • New quarterly supply of 1.84 million sq ft was recorded in Delhi NCR, taking the yearly supply to 8.30 million sq ft for 2022. A majority of the yearly supply was contributed by Gurgaon (62%), followed by Noida with a share of 37%. Just around 13% of the quarterly supply was pre-committed, highlighting the cautious approach adopted by the occupiers in 4Q22.
  • Vacancy declined by 40 bps q-o-q to settle at 28.1 % in 4Q22. The future supply pipeline is strong, with 9.5 million sq ft of space expected to complete in 2023. A majority of projects in the supply pipeline are in the advanced stages of construction.

Rents remain stable in 4Q22

  • Rents remained stable in the quarter. However in 2023, rents are expected to increase in key corridors and quality completions, backed by demand from occupiers.
  • There is a trend of flight-to-quality by occupiers looking at healthy, well-managed buildings. Therefore, rents of such office assets are expected to increase in the coming quarters.

Outlook: Office demand to be robustly driven by quality supply

  • Due to global headwinds, some delayed decision-making is expected by corporates as they look at macroeconomic signals before committing capital for new offices. However, in the near to medium term, both demand and supply are expected to remain robust.
  • In 2023, supply of around 9.5 million sq ft and net absorption of more than 5 million sq ft is expected. The demand is expected to be driven by tech firms, flex operators, healthcare, GCCs and manufacturing firms. Strong market fundamentals and a quality supply pipeline will act as catalysts to draw investor attention to office space in Delhi NCR, especially for well-leased assets.

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

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