The current calendar year is expected to close with office demand or absorption of 55-57 million square feet, much lower than the 70 million square feet seen last year, but higher than initially anticipated because of the subdued sentiment in the office market in the first half of the year.

In the first nine months of the current year, office demand was at 42 msf, and the last quarter is seen adding 13-15 msf, according to a report by industry body, the Confederation of Real Estate Developers’ Associations of India and market intelligence platform CRE Matrix.

After a subdued start to the year, leasing activity picked up in the third quarter, with demand up 29 per cent sequentially, aided by supply that grew 35 per cent. The supply in the first nine months of the year in absolute terms was close to 40 msf.

‘India to see explosion in demand for office space in 12-18 months’

However, despite the optimism, uncertainty looming over office take-up is reflected in the vacancy numbers that have shown a distinct uptrend since the middle of last year. In the third quarter of 2023, the vacancy level was at 17.4 per cent, up from 16.9 per cent a year ago. Hyderabad had the maximum vacancy at 25.7 per cent, and Bengaluru the least at 8.3 per cent.

In the first nine months of this year, office demand has touched 42 msf, with Bengaluru contributing about a fourth and Delhi-NCR about a fifth. Despite the information technology sector facing stiff headwinds, about two-thirds of the demand for office space still came from this sector.

The total grade A stock on a pan-India basis is currently at 770 msf, and another 257 msf under construction will take another three years to come into the market.

Bengaluru and Hyderabad contributed roughly half of total demand in the third quarter, and 57 per cent of to the total supply.

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