India’s office space market is experiencing remarkable growth, with gross leasing activity across the top eight cities surpassing 66.7 million square feet in the first nine months of 2024.
According to a report by Cushman & Wakefield, published in the Hindustan Times, this upward trend is expected to push total office leasing in India beyond 80 million square feet by the end of the year, surpassing the previous record of 74.5 million square feet set in 2023.
In the third quarter of 2024, the office leasing sector reported a Gross Leasing Volume (GLV) of 24.8 million square feet, marking the second-highest quarterly leasing volume in the sector’s history. Fresh leasing activities accounted for over 75% of the total GLV, highlighting strong demand for new office spaces.
- Bengaluru: Led the way with a net absorption of 4.09 million square feet, solidifying its status as a technology hub that attracts numerous companies.
- Mumbai: Followed with a net absorption of 2.6 million square feet, benefiting from its expansive corporate landscape and strong financial services sector.
- Delhi NCR: Achieved a net absorption of 1.8 million square feet, showcasing its strategic location and diverse business ecosystem.
- Pune: Notably, Pune reported a net absorption of 1.5 million square feet, reflecting a 2x growth quarter-over-quarter and a 68.8% year-over-year increase.
The total gross leasing volume for 2024 is expected to exceed 80 million square feet, driven by robust demand from Global Capability Centres (GCCs), IT-BPM, and flexible workspaces. The recent performance indicates a 32% increase in net absorption compared to the previous quarter, demonstrating a rising confidence among businesses to expand their office footprints.
Cushman & Wakefield’s data shows a historic low in vacancy rates, which have dropped to 17.1%, the lowest recorded in 14 quarters. This sharp decline of 60 basis points quarter-over-quarter reflects strong demand for office spaces. Notably, Ahmedabad and Mumbai experienced the most significant drops in vacancy rates, with reductions between 180-230 basis points. Kolkata and Delhi NCR also saw declines between 110-140 basis points.
- High Demand: The demand for new office spaces continues to outpace supply, pushing vacancy rates lower.
- Limited New Supply: The influx of new office supply has slowed, averaging only 10 million square feet added quarterly in the first nine months of 2024, marking the slowest addition in supply since the post-COVID period.
Due to the strong demand and limited supply, rental prices across the top eight markets increased by 4-5% year-over-year. Cities such as Mumbai, Chennai, Ahmedabad, and Delhi NCR witnessed the steepest rises in rentals, attributed to the tightening vacancy rates in core markets.
Global Capability Centres continued to maintain their leasing momentum, contributing to 30% of the total GLV in the current quarter. The IT-BPM sector remains the largest contributor to leasing activity, followed by flexible workspaces and the banking, financial services, and insurance (BFSI) sector. On a city level, Bengaluru contributed 27.7% to the total GLV of the quarter, followed by Mumbai at 21% and Delhi NCR at 15.1%.
Anshul Jain, Chief Executive of India, Southeast Asia, and APAC Tenant Representation at Cushman & Wakefield, noted that “strong market fundamentals have sustained extraordinary leasing momentum in the Indian office market.” He added that the decline in vacancy rates underscores the strong demand for office spaces, particularly amid limited supply.
Veera Babu, Managing Director of Tenant Representation at Cushman & Wakefield, stated that while an increase in supply is expected in the near future, “the prevailing market dynamics suggest that demand will likely continue to outstrip availability, potentially driving rental prices higher in key markets.”
The Indian office leasing market is undergoing a transformative period marked by robust demand, declining vacancy rates, and rising rental prices. As businesses adapt to new working environments and continue to expand, the market is poised for continued growth. The current momentum suggests that the sector will exceed projected leasing volumes for 2024, further solidifying India’s position as a key destination for global businesses.