India's office leasing market hit an all-time high in calendar year (CY) 2024 and registered a 19 percent YoY increase as it reached 81.7 million square feet (MSF). The IT/ITES sector had the largest share, accounting for 42 percent of total leasing demand, up from 28 percent in CY'23.
According to a joint report from CRE Matrix (real estate data analysis platform) and CREDAI (Confederation of Real Estate Developers' Association of India) , top metros including Bengaluru, Hyderabad, and Mumbai dominated office leasing, accounting for 62 percent of the demand and showing a 20 percent YoY growth.
The office leasing market also saw most of the demand for large transactions in 2024 as transactions above 100,000 sqft contributed 41 percent of total demand, with a 13 percent YoY increase, particularly in Bengaluru and Pune.
The report observed that the average demand-to-supply ratio of 1.5 in CY’24 led to a drop in vacancy rates across Delhi NCR, MMR, and Chennai micro-markets, which led to a reduction in the Pan-India vacancy rate to 15.7 percent in CY’24, as compared to 17.7 percent in CY’23. In the fourth quarter of CY2024, the demand for office leasing was 17.9 MSF while the supply was only 12.1 MSF.
The co-working or flexible office leasing segment contributed 13 MSF to office leasing demand in calendar year 2024, as compared to an average of 10 MSF over the last 3 years, registering an increase of 30 percent.
Demand from co-working operators grew 25 percent YoY, with Delhi NCR doubling and Bengaluru rising by 1.4-times in 2024 as compared to CY23.
Pan-India office rental rates reached Rs 106 per square foot, reflecting a 13 percent YoY growth. The growth in rentals is primarily driven by a high demand-supply ratio, with Hyderabad, Pune, and Mumbai playing key roles in this surge.
Grade A office stock
Despite new office completions, totalling 53 MSF, dipping by 19 percent in calendar year 2024 as compared to 2023, India crossed the milestone of 900 MSF of Grade A office stock in CY’24, the report said.
Bengaluru and Hyderabad turned out to be the largest suppliers and together added 55 percent to this supply as compared to 51 percent in CY’23. In 2024, the country saw a total supply of 53.3 MSF across all the seven top micro-markets, which include Bengaluru, Mumbai, Delhi-NCR, Hyderabad, Chennai, Kolkata and Pune.
India is expected to have a supply of 295.7 MSF of fresh Grade A office space by 2027. IT/ITES led the demand with 42 percent total leasing in 2024, followed by the co-working (16 percent) and BFSI (12 percent) sectors.
Peush Jain, MD-Commercial Leasing and Advisory, ANAROCK Group said that the year 2024 emerged as a transformative year for the office real estate market. India’s top office markets have a strong appetite owing to the growing influence of GCCs, rising leasing by BFSI and co-working operators.
“The flight to quality has necessitated the development of quality spaces by developers thereby leading to a shift in leasing patterns in the form of corporates signing pre-commitment and forward leasing across India,” he said.
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