Delhi gross office leasing declines 11% to 3.4msf in Q3

Pre-commitments accounted for a third of the leasing activity.

In Q3-2023, data from Cushman and Wakefield reveal that Delhi NCR witnessed a gross leasing of 3.4 msf, which was a marginal decline of 4% on quarterly basis and 11% drop when compared to Q3-2022. 

“However, Q3-2023 gross leasing volume was in line with the quarterly average of the past 8 quarters, broadly suggesting sustained demand in the region. The YTD gross leasing volumes for the year reached 9.82 msf as of Q3-23. The quarterly activity was driven by fresh leases with a share of 59%,” the report said.

Here’s more from Cushman and Wakefield:

Pre-commitments saw an increase in share this quarter, constituting 33% of leasing activity, while term renewals constituted merely 8% of the overall activity. The IT-BPM sector reclaimed the lead position in Q3, contributing 39% to GLV, followed by the E&M and professional services sectors, each contributing 14% to the overall share of leasing activity. 

Gurugram continued to capture the majority of the leasing activity, with 74% share, driven by submarkets such as Cyber City, NH8 - Prime and Golf Course Road Extension. Noida, on the other hand, contributed 24% to the leasing activity, with Noida Expressway and Noida City 2 being the prominent submarkets. In terms of net absorption, Delhi NCR recorded 1.21 msf in this quarter, which was 9% lower than Q2-23 and 32% less than a strong quarter last year. The YTD net absorption until Q3 23 reached 3.78 msf.

Vacancy rates decrease as demand remains consistent in Q3 

Delhi NCR experienced a notable reduction in vacancy rates, with a decrease of approximately 66 basis points on a q-o-q basis to 23.9% in Q3, and a significant drop of 2.7% when compared to the same period last year. This decline can be attributed to consistently strong leasing momentum, primarily driven by fresh leases. Submarkets such as Golf Course Extension, Cyber City And NH8 Prime in Gurugram have been consistently performing well in terms of lower vacancy, steady demand and strong upcoming supply. 

There is an expectation of 15.5 msf upcoming supply till 2025. The dominant submarkets include Cyber City, NH8 Prime and Golf Course Extension Road in Gurugram, accounting for a combined 50% share, followed by Noida Expressway at 22% and Delhi Aerocity at 11%. This influx of new supply may exert slight upward pressure on vacancy levels in the coming quarters. 

Rental rates witness modest increase in Q3 

City-level rental rates inched up, growing by 1.2% compared to the previous quarter and a 2.9% increase compared to the same period last year. This growth is attributed to healthy leasing activity witnessed during the quarter. Additionally, certain micro markets like Golf Course Road Extension, NH8 - Prime in Gurugram, and Noida Expressway may see rents rise further as quality projects are slated for completion in the upcoming quarters.