BLOGS
India's Office Leasing Market: A Record-Breaking Surge in 2024
September, 2024
India's real estate market is undergoing a significant transformation, with the office leasing segment leading the charge. In 2024, the demand for office spaces in key cities like Bengaluru, Mumbai, and Delhi-NCR is reaching unprecedented levels. This article explores the factors driving this surge in office leasing across India and its implications for the country's economic landscape.
Record-Breaking Leasing Activity
India's office leasing market is poised to achieve a historic milestone in 2024, with the total office space leased across the top eight cities expected to reach an impressive 80 million square feet (msf). This would mark the third consecutive year of surpassing the 70 msf milestone—a first in India’s office space leasing history.
The first half of 2024 alone recorded 41.9 msf in leasing activity, the highest ever for this period. The momentum is expected to continue, with over 40 msf likely to be leased in the second half of the year.
Key Drivers of Growth
Global Capability Centres (GCCs)
The rise of Global Capability Centres (GCCs) has been a crucial factor driving the growth in office leasing. These offshore units of multinational corporations are attracted to India's skilled talent pool, tech-friendly environment, and ongoing infrastructure development. In the first half of 2024, GCCs accounted for 26% of the total gross leasing volume (GLV), with Bengaluru leading the charge, capturing 47% of GCC leasing.
Bengaluru: The Epicentre of Growth
Bengaluru continues to dominate India's office leasing market, recording 12.2 msf in the first half of 2024— a remarkable 132% year-on-year growth. The city’s thriving ecosystem of startups, tech giants, and multinational corporations, combined with a business-friendly climate, makes it a prime location for office space. The strong demand from GCCs and other sectors has firmly positioned Bengaluru as a key driver of growth in the commercial real estate sector.
Mumbai: The Financial Powerhouse
Mumbai, India's financial capital, is also experiencing significant growth in office leasing. With 9.5 msf leased during the first half of 2024, the city recorded a 71% year-on-year increase. Mumbai's status as a financial hub and its dynamic business environment continue to attract corporations from various sectors, driving up leasing activity.
Hyderabad and Kolkata: Emerging Markets
Hyderabad and Kolkata have emerged as significant contributors to the overall growth in office leasing. Hyderabad recorded 5 msf of leasing activity in the first half of 2024, while Kolkata also saw substantial growth. Both cities are benefiting from increased investments and a growing demand for office spaces.
Post-Pandemic Recovery and Demand-Supply Dynamics
The pandemic temporarily disrupted the office leasing market, but recovery is now in full swing. As businesses regain confidence and vaccination rates rise, there is a stronger return to in-office work, with many companies adopting hybrid models. This resurgence in demand is further fuelled by the optimisation of pre-leased buildings and new supply entering the market.
New supply for the first half of 2024 stood at 20.8 msf, with Hyderabad and Bengaluru together accounting for approximately 51% of this new supply. The overall Grade A vacancy rate decreased by 40 basis points to 17.7%, the lowest since Q4 2021, indicating a tightening market.
Sectoral Contributions
The IT-BPM sector continues to dominate leasing activity, contributing 26% of the GLV in the first half of 2024. The BFSI sector followed as the second-largest contributor, with a significant 60% growth compared to the first half of 2023. The Engineering & Manufacturing sector also showed strong performance, capturing 17% of the lease volume, while flexible workspace operators saw a 44% year-on-year growth.
Conclusion
As we progress through 2024, India's office leasing market is set to reach a record 80 million square feet. This surge underscores the resilience and adaptability of the Indian real estate market, driven by strong economic fundamentals, strategic investments, and a focus on infrastructure development.
The robust demand from GCCs, tech giants, and multinational corporations highlights India's growing importance as a global business hub. As businesses continue to seek prime office spaces, the office leasing market will remain a key indicator of India’s economic progress and its ability to attract and retain global talent and investment.
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