Office space absorption across six major Indian cities has shot up by around 30 percent on-year to 55.1 million square feet in the first nine months of 2024.
Experts estimate that the office space demand will surpass 70 million square feet by the end of 2024 across Mumbai, Bengaluru, Delhi NCR, Hyderabad, Chennai and Pune.
According to data from Savills India, a global real estate advisory firm, the year-to-date (YTD) leasing activity has set a new benchmark for the January-September 2024 period and with only 7 million sq ft remaining to surpass the 2023 total, the year 2024 is expected to achieve absorption levels in the range of 70-74 million sq ft.
The office leasing activity also saw a quarterly surge in absorption. The third quarter of 2024 saw office absorption hit 20.2 million sq ft, a 28 percent increase from Q3 2023. Bengaluru, Delhi-NCR, and Mumbai collectively contributed 66 percent of the overall leasing activity during this period, the Savills India data showed.
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Naveen Nandwani, managing director for commercial advisory and transactions at Savills India, said that India’s office market reached record-high absorption levels in Q3 of calendar year 2024, reflecting strong business sentiment among occupiers.
“With employees returning to physical offices, demand has surged across all segments, including tech. We anticipate this momentum to continue in the last quarter of the year, potentially driving absorption levels to new record of over 70 million sq ft in 2024. Demand is likely to be driven by tech, BFSI, flex workspace and engineering and manufacturing occupiers,” he said.
The data showed that the IT-BPM sector led the market with a 29 percent share in Q3, followed by flexible workspaces (23 percent) and the BFSI sector (22 percent). Additionally, large deals accounted for 50 percent of total leasing activity, with Bengaluru, Delhi-NCR, and Pune driving more than 50 percent of their respective leasing through such transactions.
While demand soared, new office space supply slowed down during the first nine months of 2024, with a total of 32.6 million sq ft added, reflecting a 12 percent on-year decline. As a result, vacancy rates decreased to 15.5 percent by the end of September 2024, data showed.
The year-to-date absorption in 2024 stood at 15.9 million sq ft in Bengaluru, registering a significant rise of 49 percent in the corresponding period the previous year. The city is expected to achieve a record gross absorption of about 20 million sq ft in 2024, the data showed.
Mumbai recorded YTD absorption of 9.7 million sq ft in 2024. Mumbai is likely to witness a decadal peak absorption in 2024 of about 12 million sq ft.
The YTD absorption in Delhi NCR stood at 7.6 million sq ft, registering a decline of 6 percent when compared with the absorption in corresponding period in 2023. Delhi NCR is expected to see a gross absorption of 11-12 million sq ft in 2024.
Hyderabad witnessed a significant rise in absorption between January and September 2024, reaching 8.7 million sq ft, registering a 34 percent YoY growth. Pune witnessed a YTD absorption of 6.6 million sq ft, with a projection to end the year with a gross absorption of 9 million sq ft, the data showed.
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