India’s office leasing market is projected to surpass 70 million square feet in 2024, driven by robust demand from the technology, banking, financial services, and insurance (BFSI), flexible workspace, engineering, and manufacturing sectors, according to a report by Savills India.
As reported by the Hindustan Times, the third quarter of 2024 saw office absorption reach 20.2 million square feet, reflecting a 28% increase compared to Q3 2023. Bengaluru, Delhi-NCR, and Mumbai collectively accounted for 66% of the overall leasing activity during this period.
From January to September 2024, demand totaled 55.1 million square feet, marking a 30% year-on-year increase across six major cities. Year-to-date (YTD) leasing activity has set a new benchmark for the January-September period, matching the total performance of the full year in 2022. With just 7 million square feet needed to surpass 2023’s total, projections for 2024 anticipate absorption levels between 70 and 74 million square feet.
Bengaluru led the charge, recording 6.2 million square feet of absorption in Q3 2024, which is a 48% increase year-over-year. Large transactions (100,000 square feet and more) dominated the leasing activity, accounting for 67% of the total. Year-to-date absorption in Bengaluru stands at 15.9 million square feet, reflecting a 49% rise compared to the same period last year. The city is on track for a record gross absorption of about 20 million square feet in 2024.
The third quarter also witnessed a significant influx of new supply, with 6.2 million square feet added—an increase of 128% from the previous quarter. The BFSI sector contributed 23% to Bengaluru’s total market leasing activity in Q3, while the IT-BPM sector remained the top contributor with a 46% market share.
Delhi-NCR recorded an absorption of 4.0 million square feet in Q3 2024, representing a remarkable 92% increase year-over-year. However, year-to-date absorption is 7.6 million square feet, down 6% from the same period in 2023. The region is expected to achieve a gross absorption of 11 to 12 million square feet in 2024.
In Q3, Delhi-NCR added 0.7 million square feet of new supply, bringing the year-to-date supply to 2.0 million square feet, a 17% decrease from the 2.4 million square feet recorded during the same period last year. Gurugram contributed the highest share of leasing activity at 64%, with Gurugram SBD accounting for 49% of the city’s leasing. Noida followed with a 27% share, while Delhi contributed 9%.
The flexible workspace segment led leasing activity with a 50% share in absorption for Q3 2024, followed by engineering and manufacturing (9%) and BFSI (7.8%).
Mumbai experienced an absorption of 3.2 million square feet in Q3 2024, a 35% increase year-over-year. Mid-sized deals (25,000 to 99,999 square feet) continued to dominate, accounting for 36% of the leasing activity. Year-to-date absorption stands at 9.7 million square feet, just below the previous peak of 10.1 million square feet recorded in 2023. The city is poised for a decadal peak absorption of approximately 12 million square feet in 2024.
Mumbai added 1.6 million square feet of new supply in Q3, nearly doubling that of the previous year. The BFSI sector remained the predominant demand driver with a 32% share, followed by the technology sector at 17%.
While demand surged, new office completions slowed in the first nine months of 2024, with a total of 32.6 million square feet added, reflecting a 12% year-over-year decline. As a result, vacancy rates decreased to 15.5% by the end of September.
Savills India forecasts that leasing activity will reach 70 to 74 million square feet by the end of 2024, which would represent a 17% increase from last year. New completions are also expected to accelerate, with a projected total of 60 to 62 million square feet, a 22% increase from 2023.
India’s office market reached record-high absorption levels in Q3 of 2024, reflecting strong business sentiment among occupiers. With employees returning to physical offices, demand has surged across all segments, including tech. We anticipate this momentum to continue in the last quarter of the year, potentially driving absorption levels to a new record of over 70 million square feet in 2024,” said Naveen Nandwani, Managing Director of Commercial Advisory and Transactions at Savills India.