Average office rents crossed Rs 100 psf mark in Sep quarter, Bengaluru remains largest market

Bengaluru is India's largest office market by demand, and Mumbai is the most expensive, by average market rent

The average rent for grade A office space across six cities of India breached the Rs 100 mark on a per square foot (psf) per month basis for the first time ever, according to a report by real estate data analytics firm CRE Matrix, in collaboration with the Confederation of Real Estate Developers' Association of India (CREDAI). The spike has been driven by upswings in office rentals in Bengaluru and Delhi NCR with average rents across the cities standing at Rs 110.20 psf per month.

According to the report,  demand in the July-September quarter in Delhi NCR, the Mumbai metropolitan region, Bengaluru, Chennai, Pune, and Hyderabad was 18.4 million square feet, with Bengaluru remaining India's largest office market,  at nearly 5 million square feet. Office vacancies remained relatively high at 16.1 percent, in spite of recent reductions in this aspect.

Mumbai was the most expensive office market, commanding rents of Rs 146.30 psf per month on average, while rentals in Delhi NCR continued to grow and reached the triple-digit mark, as did Bengaluru, according to the report.

The increase in rentals has also been due to a surge in demand from co-working and managed-space operators, which comprised 22 percent of the leasing during the quarter. According to real estate observers, demand from both tech and non-tech players for global capability centres (GCCs) is driving leasing activity by co-working players.

"The demand from GCCs is poised to revolutionise India’s commercial real estate market with an increase in investments from both domestic and international sources. We anticipate a surge in demand for flexible workspaces as large corporates, especially new entrants, look for scalable and agile office solutions," said Manish Khedia, Managing Director, South and West India, and Sri Lanka, of The Executive Centre, a managed space operator.

A recent report from CBRE, a real estate services firm, said that GCCs may drive more than a third of office leasing in India. Industry insiders added that many will prefer co-working and managed space operators, as the lease-to-operation period is lower, as are the fit-out costs.

In Bengaluru, India's predominant tech hub, co-working spaces were the leaders in terms of leasing activity in the July-September quarter, and nearly all major deals during the period involved non-tech lessors, such as GCCs for supermarket chains and the banking and financial services sector. Of the remaining office space to be supplied in 2024, around 60 percent is intended for non-tech usage, indicating strong demand from non-technology GCCs.