Average Vacancy Levels Of Office Space Across Top 6 Cities Stable At 16.4% In Q4: Colliers

Vacancy levels of office spaces remained stable at 16.4% during January–March across six major cities compared to the previous quarter, with new supply being in line with current demand, according to Colliers.

While Delhi-NCR, Pune, and Hyderabad saw an increase in vacancy levels, Chennai witnessed a sharp decline.

The vacancy levels of office space in Mumbai and Bengaluru remained, by and large, stable, the data showed.

Real estate consultant Colliers India noted that new supply largely treaded alongside demand in most of the markets, resulting in stable vacancy levels.

"At a time when occupiers are delaying decision-making on leasing office spaces amidst continued economic uncertainties, the office market witnessed signs of stability in Q1 2023 with the vacancy levels remaining intact at 16.4% compared to the previous quarter," said Peush Jain, Managing Director, Office Services, India, Colliers.

Going ahead, Jain expected demand and supply to move in unison, keeping the vacancy and rental levels rangebound.

"The latter part of 2023 may see signs of a strong recovery provided the recessionary concerns lessen in the beginning of the second half of 2023," he said.

Among six cities, the vacancy level of office spaces in Grade-A buildings rose in Bengaluru to 12.8% in January–March from 12.7% in the previous quarter. In Chennai, it dropped to 16.6% from 19.9%

Office vacancies in Delhi-NCR increased to 20% from 19.6%. Hyderabad saw an increase in vacancy levels to 19.9% from 18.6%. In Mumbai, the vacancy rate remained flat at 15.3%.

The vacancy rate for office space in Pune rose to 16.7% in the first quarter of this year from 16.2% in October–December 2022.

Earlier this month, Colliers India released data on the office market, which showed that gross leasing fell to 10.1 million square feet in January–March from 12.5 million square feet in the corresponding period of the previous year.

New supply declined 34% during January–March to 9.5 million square feet from 14.4 million square feet in the year-ago period. Though leasing activity in Q1 2023 was subdued, Colliers expects that the market is likely to pick up in the latter part of the year, driven by strong growth fundamentals.

"While the office market has a strong supply pipeline, developers will be more careful and cautious basis how the demand pans out going ahead, thereby avoiding speculative supply," it added.