INDUSTRY LANDSCAPE
Grade A office market overview
CY22 was the second best year in Indian office history in terms of gross and net absorption which grew by c. 49% y-o-y and c. 44% y-o-y, respectively. The leasing volume in Q1 CY23 was recorded at 12.8 msf, better than the quarterly leasing volumes of Q1 CY22.
The commercial office spaces in India have evolved from standalone strata sold units to modern business parks which
offer amenities such as cafeterias, conference room facilities, and multi-purpose sports courts, among others. Post
the pandemic, there has been a complete transformation of occupiers’ definition of Grade A assets. Occupiers are
keen to be associated with single owner buildings that have the best health, wellness, and safety protocols. Many
occupiers have a global mandate to shift to green buildings that adopt the best sustainability practices.
The resultant uptick in demand for Grade A assets is evident, with institutionally managed office spaces capturing
significant percentage of the demand.
Return to office plans put in motion
Occupiers and employees alike have realized
and acknowledged the benefits that in-person
interaction brings. Consequently, there is a
lot of emphasis from the top-most echelons to
encourage employees to attend office few days
every week to begin with and then ramp it up. They
want to usher the returning employees to one of
the best environments that fosters collaboration,
augments innovation, and boosts productivity.
Hence, there is increased focus on occupying
premium Grade A office ecosystems.
Office demand recovery propelled by:
- Strong hiring by technology companies and
GCCs over the past two years and their space
take up not being commensurate with the hiring
- Companies starting to call back employees
to office
- Preference of occupiers to operate from secured
office environments with adequate health, safety
and wellness protocols
- Shift from strata sold assets to quality, single
owner Grade A properties
- Rise in demand for campus style developments
Presence in the best performing micro-markets
Top seven markets in India comprised
c. 749 msf of Grade A completed stock as of
March 31, 2023. Mindspace REIT is present in
four of the top seven markets (Mumbai Region,
Hyderabad, Pune, and Chennai). The net
absorption during CY22 stood at 36.7 msf, and
our micro-markets constituted 56.7% of the net
absorption during the year. These cities have
exhibited strong underlying growth fundamentals,
such as economic and employment growth,
diverse pool of tenants, educated workforce,
robust transportation infrastructure, and favorable
demand and supply trends.
Completed Stock for top 7 markets (%)
Hyderabad
Hyderabad is one of the fastest-growing cities
in India. The city has succeeded in building
on its IT/ITeS and pharmaceutical capabilities
and managed to attract several global
technology and pharmaceutical giants to invest
in and operate from the city. The IT/ITeS and
pharmaceutical industries are the two major
sectors that contribute maximum to the city’s
GDP. Proactive initiatives and investor friendly
policies such as the new industrial policy of TSiPass
by the state government has driven the fast
and strong economic growth of the city over the
last five years.
Completed Stock in sq ft (%)
Source: Jones Lang LaSelle Inc. (JLL)
Key updates – Madhapur
Source: Jones Lang LaSelle Inc. (JLL)
- Madhapur is the most preferred
micro-market in Hyderabad
garnering nearly two-thirds of
net absorption every year.
- Leasing activity in Madhapur
has been largely driven by IT/
ITeS over the years. However,
in the last couple of years,
BFSI, co-working, telecom,
and healthcare firms have
also favored expanding their
operations in the submarket.
- Rents in Madhapur have grown
at a CAGR of c. 5.1% between
2016 and 2022.
Pune
Pune has now been declared as the largest city in
the state of Maharashtra in terms of geographical
area coverage. The city has been a major
educational hub since many decades having a
presence of premium educational institutes in the
country. Pune is also an important industrial hub
having a presence of prominent foreign as well
as domestic automobile, automobile ancillaries
and electronics manufacturers. Attractive
demographics and readily available skilled
workforce have attracted corporates from various
sectors like IT/ITeS, manufacturing, BFSI,
consulting etc. to have their office in the city.
Completed Stock in sq ft (%)
Source: Jones Lang LaSelle Inc. (JLL)
Key updates – SBD East
Source: JLL and Wakefield Research
- SBD East has the largest share – c. 55% in the total
Grade A stock of the city and has accounted for a
51% share of net absorption from 2016 till 2019 and
has also recorded an even higher share of 57% in the
post-COVID period.
- SBD East has consistently recorded lower vacancy
levels than the city's average. Quality office parks,
proximity to the city centre, support physical and
social infrastructure, connectivity, and its evolution
as a holistic work-play-live ecosystem has supported
SBD East's continued strength as the premier office
market corridor.
Mumbai Region
Mumbai is the financial capital, an economic
powerhouse, and one of the key industrial hubs
of India. It is also one of the most expensive real
estate markets in India, with rents and capital
values in the key office sub-markets being the
highest in the country.
Completed Stock in sq ft (%)
Source: Jones Lang LaSelle Inc. (JLL)
Key updates - Thane Belapur Road
Source: Jones Lang LaSelle Inc. (JLL)
Thane Belapur Road
- In the Thane Belapur market, quality institutional assets
have enjoyed strong occupancy levels and strata-titled
projects are major contributors to headline vacancy.
- The IT/ITeS tenants accounted for a major chunk of the
leasing activity in the past five years in the Thane-Belapur
market. Recently, BFSI and co-working operators have
been quite active.
- Thane-Belapur Road has witnessed strong demand from
IT/ITeS companies and BFSI back offices as they require
larger office spaces at relatively cheaper rents.
- Vacancy in the micro-market is largely on account of
SEZ properties.
Key Updates - BKC and Annexe
Source: Jones Lang LaSelle Inc. (JLL)
BKC and Annexe
- BKC and Annexe remains the premier front office submarket in Mumbai.
- Limited supply and robust space take-up has ensured that vacancy levels have now dropped down to single digits and vacancy remains extremely limited in quality assets.
Key updates - Malad – Goregaon
Source: Jones Lang LaSelle Inc. (JLL)
Malad – Goregaon
- Quality social infrastructure, improving connectivity through the operational metro lines, and competitive rentals make Malad-Goregaon a major office corridor for global occupiers.
- The strong demand and low relevant vacancy have combined to push up the average rents.
Chennai
Chennai is the fourth-largest metropolitan city in India. The rapidly evolving real estate sector is benefiting from the strong growth of the IT and Manufacturing industries and improving infrastructure. The city is culturally diverse and socially cosmopolitan.
Completed Stock in sq ft (%)
Source: Jones Lang LaSelle Inc. (JLL)
Key updates – South West
Source: Jones Lang LaSelle Inc. (JLL)
South-West
- The South-West market accounts for c. 27% share of the operational Grade A stock in Chennai
- The South-West market has clocked an average 19%
share of net absorption from 2016 to 2019. In the
post-COVID period, it has accounted for a 31% share
of net absorption as quality projects have found takers
from global occupiers.
- The South-West market has been dominated by IT/
ITeS occupiers in terms of share of leasing activity,
but in more recent times BFSI occupiers, particularly
GCCs and consulting firms along with manufacturing
companies have scaled up.