Delhi gross office leasing volume drops 21% to 2.9msf in Q1

Fresh space takeup accounted for 70% of the deals.

According to Cushman and Wakefield, Delhi NCR witnessed a gross leasing volume (GLV) of 2.93 msf in Q1-24, about 21% lower than the robust volumes recorded in Q4-23, although much in line when compared to the same period last year. 

Bulk of the deals recorded consisted of fresh space take-up as it accounted for 70% share, followed by precommitments with a 25% share. 

Here’s more from Cushman and Wakefield:

The share of pre-commitments has risen from an average of 9% over the past eight quarters to 25% in Q1-24, this can be largely attributed to a high demand for the upcoming projects of superior grade. Flexible workspaces led the Q1 demand with 23% share, followed by the BFSI sector with 16% share. Engineering & Manufacturing sector and IT-BPM closely followed with 15% shares each during the quarter, as both sectors saw a slack compared to their typical position as the top two contributors to demand. 

In terms of net absorption NCR recorded 1.45 msf during Q1-24 marking an 11% dip as compared to a healthy Q4-23, but 18% increase from the same period last year. 

At a sub-market level, Gurugram continued to lead demand within NCR, securing a 73% share in demand mostly in prime sub-markets such as Cybercity and NH-8 Prime, cumulatively representing 46% of overall GLV of the city, followed by Golf Course Road Extension and Golf Course Road. Noida contributed to the remaining demand, with a 23% share primarily in the Sector 62 region, followed by the Noida Expressway. 

Vacancy rates inch-up marginally in Q1 as heavy supply enter 

Delhi NCR witnessed an influx of ~2.8 msf of supply during the first quarter, almost in line with supply seen in the immediate preceding quarter. It is noteworthy to highlight that Q4-23 supply was a 5-quarter high volume, and Q1-24 saw a repeat of the same volume. Majority of the Q1 supply addition was secured by Noida with a share of 63% across Expressway region followed by Noida Sector 62 region. Prime markets of Gurugram such as Golf Course road extension and NH-8 Prime followed with a 35% share. Consequently, vacancy rate in the city has increased by 50 basis points from last quarter to 24.9% in Q1-24. 

New supply of over 3 msf is expected to enter the market in the remainder of 2024, with 60% concentrated in Gurgaon submarkets followed by 40% in Noida Expressway, therefore, vacancy rates are likely to increase in near term. 

Rentals witness a rise in Q1-24 

During Q1-24, Delhi NCR saw rents increase by almost 2% q-o-q and a notable annual rental growth of 5% on average. Growth in rentals may be attributed to a healthy leasing activity during the quarter, coupled with quality new supply. The rental rates are expected to remain range-bound in the coming quarters of 2024, as the city anticipates a heavy influx of supply alongside already elevated vacancy rates in certain submarkets that are yet to be bridged.