India's office market has displayed a remarkable resilience in the first quarter of 2023, with several real estate service firms reporting strong growth, according to recent reports.

Year-On-Year

JLL reported a surge of 23.2% YoY in office market activity, with 12.8 mn sq ft leased during the quarter. Similarly, Cushman & Wakefield reported a 15.8% YoY increase in leasing activity, with approximately 11.6 mn sq ft of fresh leasing during the quarter, CBRE's report highlighted a growth of 9% YoY in leasing activity, with approximately 12.6 mn sq ft of space leased during the quarter. Knight Frank also reported an increase in office leasing activity in Q1 2023, with approximately 11.3 mn sq ft of space leased, representing a growth of 5% YoY. While Savills India reported a 11% YoY decrease in office absorption, with 14 mn sq ft of space absorbed during the quarter. Colliers' report also shows a decline in leasing activity, with total leasing at 10.1 mn sq ft, a 19% YoY decline.

The Technology, BFSI and Flex Space sectors were the main drivers of demand for office space, accounting for the majority of the leasing activity. JLL reported that NCR and Bengaluru accounted for most of the total leasing activity at 55%, while Cushman & Wakefield highlighted that the Technology sector continued to dominate the demand for office space, followed by the Professional Services and BFSI sector. Savills India reported that the demand for office space was driven by Flex space, IT and BFSI sectors, with an increase in demand for Grade A office space in cities such as Bengaluru, Pune, and Hyderabad. Knight Frank also noted that the demand for office space was primarily driven by the Flex Space, IT and BFSI sectors, which accounted for 61% of the total leasing activity. Colliers reported that the cumulative share of Bangalore, Delhi-NCR, and Chennai in leasing activity in Q1 2023 was 62%.

Quarter-On-Quarter

However, despite the strong growth trajectory, India's office market witnessed a QoQ decline in Q1 2023, according to several leading real estate consultancy firms. JLL reported that the Indian office market recorded an 8.7% decline from the previous quarter. On the contrary, Savills' report shows that office leasing activity in Q1 2023 totaled 14.0 mn sq ft, a 16% QoQ increase. CBRE reported a 20% QoQ decline in space take-up in Q1 2023. These declines were attributed to a slowing economy.

The real estate market in India is set to witness a continued growth trend in 2023, as companies increasingly seek to establish their presence in the country. With the technology and BFSI sectors driving demand for office space, southern cities such as Bengaluru, Hyderabad, and Chennai are likely to remain the most attractive destinations for companies looking to expand their operations in India. However, the evolving economic scenario remain significant factors that may impact the growth trajectory of the Indian real estate market.

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