Delhi to see nearly 6m sq ft of new office space this year

Net absorption is expected to hit 5.6m sq ft.

As office occupancy levels are rising and upbeat occupier sentiment is seen across industry segments, JLL’s outlook remains bright for Delhi’s office market. Leasing activity is expected to remain strong, led by quality supply from big developers in prime business districts.

In a report, JLL said about 5.8 million sq ft of office space is expected to be completed in 2023. Strong space take-up activity is anticipated in the second half of 2023 as well, resulting in a projected net absorption of 5.5–5.6 million sq ft for the full year.

Here’s more from JLL:

Net absorption of around 3.32 million sq ft was recorded in 1H23, which was higher by 25% compared to the same period in 2022. The quarterly net absorption, though lower by 31% q-o-q, increased by 3% y-o-y. Strong occupier demand was observed in the IT/ITeS, BFSI and manufacturing segments.

Flex continued to make rapid strides, led by the demand for managed workspaces, which resulted in a share of 17% in gross leasing for the quarter. In 2Q23, Gurgaon recorded the highest net absorption with a share of 49%, followed by Noida with a 32% share in the quarterly net absorption figures.

New supply addition of 1.05 million sq ft in 2Q23

The quarterly supply addition stood at 1.05 million sq ft, with five completions recorded in 2Q23. Gurgaon contributed significantly to new supply with a 45% share, while Noida was close behind with a 42% share, and the rest was in Delhi SBD. One of the prominent completions included DLF Tech Park in Noida, which came on-stream with a 54% pre-commitment level.

The average pre-commitment rate for new completions stood at 37%. Over the next six months, there is a projected supply of 2.95 million sq ft, most of it lined up for Gurgaon and Noida. Delhi SBD will also see the completion of a quality office project by an established developer in 2023.

Rents move up, driven by quality assets

On a q-o-q basis, rents showed a strengthening trend in quality projects with low vacancy levels and backed by institutional owners. Steady growth in rents is expected in the medium term as developers are commanding/quoting higher rents for new phases of existing projects as well.

Net absorption in quality assets is likely to continue outpacing available supply in the near term, causing vacancy rates to decline and thereby giving a fillip to rent growth. However, the vacancy levels of strata sold and poorly managed projects will likely remain high, causing their rents to stagnate.

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