Decline in Office Demand in Delhi-NCR: A Closer Look at the Real Estate Market
Data from the first quarter of the current calendar year indicates a sluggish trend in the office real estate market of Delhi-NCR. According to JLL India, net leasing of workspaces has dropped to 1.5 million square feet, down from 3.7 million square feet previously. This represents a 60% decline, underscoring the current challenges in the corporate real estate sector.
Net leasing for office spaces has significantly decreased, totaling 1.5 million square feet. Gross leasing, which includes all lease transactions recorded during this period, such as firm pre-commitments, but does not account for lease renewals, also saw a decline. The calculation for net absorption is based on the occupancy of new floor space minus the space vacated. Space that has been pre-committed is not considered absorbed until actual occupancy occurs.
Despite the current downturn, JLL India reported that new office supply during January to March was 1.39 million square feet, a decrease from 2.9 million square feet in the same period last year. The firm noted that the long-term fundamentals of the Delhi-NCR office market remain strong, with expectations for an uptick in leasing activities in upcoming quarters. Major real estate player DLF holds a substantial portfolio of office properties in the region, alongside other significant players like Bharti Realty and Max Estates.
Recently, Signature Global has formed a joint venture with RMZ Group to develop a commercial project in Gurugram, with an investment of approximately ₹7,500 crores. This project will encompass around 5.5 million square feet of leasable area, including approximately 3.5 million square feet of prime office space, along with retail space and two hotels with around 500 rooms. Gors Group is also planning to develop office space in Noida.
In the seven major cities—Mumbai, Bengaluru, Delhi-NCR, Pune, Hyderabad, Chennai, and Kolkata—gross leasing of office space increased by 10% to 21.5 million square feet from 19.5 million square feet in the same period last year. Net absorption or leasing rose by 7%, moving from 12.8 million square feet to 13.7 million square feet. The increase in gross leasing in these cities is attributed to foreign companies seeking workspace to establish global capability centers.
Rahul Arora, Senior Managing Director of JLL India's Office Leasing and Retail Services, stated that the market fundamentals are consistently strengthening, with vacancy rates across India dropping to a five-year low of 14.7%. The consultancy envisions India transitioning from a 'cost center' to an 'innovation hub,' with Bengaluru leading this growth trajectory.
Vibhor Jain, Founder and CEO of Carbon Guardians, expressed that India's office market is undergoing a significant structural transformation, rather than just another cycle. While demand remains robust, a realistic approach is necessary. Prolonged geopolitical tensions could increase costs related to energy, logistics, and fit-outs, even as the world adapts. Additionally, Jain noted that AI is reshaping traditional IT service models, directly impacting office demand based on employee numbers in India. He emphasized the need to create quality workspaces tailored for selective and evolving users.
