India’s office market is set for another record-breaking year as rents in the top eight cities are projected to cross 80 million square feet (msf) by 2024, according to recent office data from real estate consultancy Cushman & Wakefield. This would be the third consecutive year that rents have crossed the 70 msf milestone.
In the first half of 2024, 41.9 million square feet of leasing was recorded, marking the highest leasing volume ever for the first half of any year. This represents 56% of total gross leasing volume (GLV) for 2023.
“This impressive growth is primarily due to new demand from multinational corporations, the optimization of pre-leased buildings in key cities and higher office profitability. The market is expected to maintain its strong momentum throughout the year, with more than 40 million square feet up for lease in the second half,” the report added.
Key points
-
Record-breaking leasing: India’s office leasing market is projected to see another record year, with total leasing to surpass 80 million square feet (msf) by 2024. -
Strong first half: The first half of 2024 saw the highest leasing volume in history, reaching 41.9 million square feet. -
Driving factors: Growth is driven by increased demand from multinational corporations, optimized pre-leased buildings and higher office profitability. -
City performance:Bangalore and Mumbai led with significant year-on-year growth in leasing activity. -
Sector trends:The IT-BPM sector remains dominant, followed by BFSI and Engineering & Manufacturing. -
New supply: Hyderabad and Bengaluru are projected to lead the supply of new offices by 2024.
In terms of cities, Bengaluru, Mumbai, Hyderabad and Kolkata recorded the highest ever leasing figures in H1 2024. Bengaluru and Mumbai saw the highest growth of 132% and 71% respectively on a year-on-year basis, followed by Hyderabad and Kolkata.
India’s role in driving digital transformation has contributed significantly to the growth of Global Capacity Centres (GCCs) in the region. As a result, GCC transactions accounted for 26% of the total Global Location Value (GLV) in H1 2024. GLV = all leasing activity in the market, including lease renewals by corporates.
During this period, around 120 new GCC centres were established in India: Bengaluru emerged as the leading city for GCCs, accounting for almost half of all leasing activity for these centres.
Net absorption (new space occupied during the period (QoR/Y), adjusted for exits, if any) in H1FY24 also reached new heights, registering a year-on-year growth of 46%, the highest for any H1 since 2020. While Bengaluru had the highest share of 29% net absorption among the top 8 cities in the first half of the year, cities such as Mumbai, Delhi-NCR, Chennai and Kolkata recorded their highest-ever bi-annual net absorption.
The IT-BPM sector continued to dominate the leasing activity, contributing 26% of the GLV in H1 2024. The BFSI sector followed as the second-largest contributor, registering a significant growth of 60% compared to H1 2023. The Engineering & Manufacturing sector witnessed a YoY growth of 31%, capturing 17% of the leasing volume. Flexible workspace operators witnessed a YoY growth of 44%, while professional services maintained a stable share of 10-12% over the past two years.
New supply for H1 2024 stood at 20.8 million sq ft, with Hyderabad and Bengaluru together accounting for about 51% of the new supply. Hyderabad topped the list with a 27% share.
Hyderabad and Bengaluru are expected to lead new supply by 2024, with a combined share of 48%. Mumbai is expected to see a three-fold increase in new supply.
“India’s office leasing market is witnessing a notable uptick, driven by strong economic fundamentals, an advanced digital ecosystem, higher ROI on offices, and pent-up demand from companies that delayed their expansion plans during the pandemic. We are also witnessing companies prioritising high-quality spaces with strong ESG credentials and modern amenities, leading to consolidation in the market and a resurgence of large operations (>100,000 sq ft). While domestic companies continue to show steady growth, we are also seeing a notable uptick in demand from international companies,” said Veera Babu, Managing Director, Tenant Representation.
First published: August 28, 2024 | 12:55 pm IS
Disclaimer
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.