India’s office leasing market recorded a robust 31% year-on-year growth in the July-September quarter of 2024, reaching 17.3 million square feet across six major cities, according to a report by property consultancy Colliers.
As published by the Hindustan Times on Sept. 26, Bengaluru and Hyderabad were key drivers of this surge, accounting for more than half of the overall activity.
Bengaluru achieved its highest-ever quarterly leasing with 6.3 million square feet of office space taken up in Q3 2024. This marks a significant milestone for the city, which has long been a hub for tech companies and large corporations. Hyderabad followed closely, reflecting strong demand in both markets. Pune, too, saw a remarkable 2.6 million square feet leased, a 2.6-fold increase compared to Q3 2023, underscoring the growing demand in India’s key commercial hubs.
In the first three quarters of 2024, India saw a cumulative demand of 46.7 million square feet for Grade A office space across Bengaluru, Hyderabad, Pune, Mumbai, Chennai, and Delhi-NCR. These six cities continue to dominate the office leasing market.
The report emphasized that occupier confidence is reflected in the continued demand for large office spaces. Deals exceeding 100,000 square feet accounted for 65% of total leasing activity in Q3 2024. Bengaluru saw 81% of its leases involving large deals, while Pune followed with 71%, driven by the technology and banking, financial services, and insurance (BFSI) sectors.
According to Arpit Mehrotra, managing director of office services at Colliers India, the surge in large transactions highlights the confidence of corporate occupiers, particularly in the tech and BFSI sectors, to commit to expansive office spaces.
The supply of new office spaces rose in tandem with demand, with 14.4 million square feet of new office supply added in Q3 2024 — a 33% year-on-year increase. Bengaluru and Hyderabad together accounted for 64% of the new office space supply during the quarter, making them the top contributors to the market’s expansion.
Delhi-NCR also witnessed its highest quarterly supply increase in two years, adding 3.3 million square feet of new space. The South Delhi micro-market, driven by a few major project completions, accounted for nearly 70% of this new supply.
Despite the influx of new office supply, vacancy rates remained stable across major markets, hovering around 17% at the end of Q3 2024. The report noted that demand has kept pace with supply, keeping vacancy levels in check. Sector-wise, the technology industry led the demand, accounting for about one-fourth of the total leasing activity in Q3. BFSI occupiers and flexible office space operators followed, contributing to the sustained leasing momentum.
Interestingly, Pune and Bengaluru surpassed Mumbai in leasing activity by BFSI companies. Bengaluru accounted for 39% of the overall BFSI leasing in Q3 2024, while Pune held 25%, highlighting the shift of financial service firms towards these tech-friendly cities. This shift reflects the growing prominence of Pune and Bengaluru as key centers for both the technology and BFSI sectors.
The flexible office space segment reached a new quarterly high in Q3 2024, with 3.4 million square feet of space leased. This surpasses the previous record of 2.6 million square feet. Colliers attributed this growth to the increased activity in micro-markets such as Bengaluru’s Koramangala, CV Raman Nagar, and Indiranagar, as well as Delhi-NCR’s Golf Course Road, central Pune, and Hyderabad’s secondary business districts.
These areas collectively accounted for 54% of the total leasing activity in the flex space sector. Notably, nearly half of the leasing by flexible office operators came from large deals exceeding 100,000 square feet, signaling growing demand from larger enterprises.
Vimal Nadar, senior director and head of research at Colliers India, pointed out that flexible office space leasing had reached 7.9 million square feet so far in 2024, a 20% increase from the previous year. Delhi-NCR and Bengaluru led the demand for flex spaces, contributing 55% of the total take-up in the first nine months of the year.
India’s office leasing market continues to show resilience, with large-scale deals and the growing demand for flexible office spaces driving the market forward. The strong performance in Bengaluru, Hyderabad, and Pune suggests that these cities will remain at the forefront of India’s commercial real estate market for the foreseeable future, particularly as technology and BFSI firms continue to expand their footprints.
As the demand for scalable and flexible office solutions continues to rise, the outlook for Q4 2024 remains optimistic, with supply expected to keep pace with occupier requirements.