 "India's office market set for record boom, Bengaluru and Hyderabad lead")
India's office market is set for another record-breaking year, with leasing across the top eight cities anticipated to cross 80 million square feet (msf) in 2024, according to property consultant Cushman & Wakefield’s recent office data. This would be the third consecutive year of leasing surpassing the 70 msf milestone.
The first half of 2024 recorded 41.9 msf of leasing, marking the highest leasing volume ever for the first half of any year. This represents 56% of the total gross leasing volume (GLV) for 2023.
"This impressive growth is driven primarily by fresh demand from multinational corporations, the optimisation of pre-leased buildings in key cities, and a higher return to office. The market is anticipated to maintain its strong momentum throughout the year with over 40 msf expected to be leased in the second half," the report added.
Key Highlights
- Record-Breaking Leasing: India's office leasing market is set for another record-breaking year, with total leasing expected to exceed 80 million square feet (msf) in 2024.
- Strong First Half: The first half of 2024 saw the highest-ever leasing volume, reaching 41.9 msf.
- Driving Factors: The growth is fueled by increased demand from multinational corporations, optimized pre-leased buildings, and a higher return to office.
- City Performance: Bengaluru and Mumbai led with significant year-on-year growth in leasing activity.
- Sectoral Trends: The IT-BPM sector remains dominant, followed by BFSI and Engineering & Manufacturing.
- New Supply: Hyderabad and Bengaluru are projected to lead in new office supply for 2024.
In terms of cities, Bengaluru, Mumbai, Hyderabad, and Kolkata recorded the highest-ever leasing figures in H1 2024. Bengaluru and Mumbai saw the highest growth of 132% and 71%, respectively on y-o-y basis, followed by Hyderabad and Kolkata.
India's role in driving digital transformation has contributed significantly to the growth of Global Capability Centers (GCCs) in the region. As a result, GCC transactions accounted for 26% of the total Global Location Value (GLV) in the first half of 2024. GLV = all leasing activity in the market, including renewals of contracted term by corporates.
Around 120 new GCC centers were established in India during this period.: Bengaluru emerged as the leading city for GCCs, accounting for nearly half of all leasing activity by these centers.
Net absorption ( new space occupied during the period (quarter/year), adjusted for exits, if any) in H1 2024 also reached new heights, recording a 46% year-on-year growth—the highest for any first half since 2020. While Bengaluru had the highest share of 29% net absorption amongst all top-8 cities in the first half of the year, cities such as Mumbai, Delhi-NCR, Chennai, and Kolkata recorded their highest-ever biannual net absorption.
The IT-BPM sector continued to dominate leasing activity, contributing 26% of the GLV in H1 2024. The BFSI sector followed as the second-largest contributor, recording a significant 60% growth compared to H1 2023. The Engineering & Manufacturing sector saw a 31% year-on-year growth, capturing 17% of the lease volume. Flexible workspace operators saw a 44% year-on-year growth, while professional services maintained a stable share of 10-12% over the past two years.
New supply for the first half of 2024 stood at 20.8 MSF, with Hyderabad and Bengaluru together accounting for approximately 51% of the new supply. Hyderabad led with a 27% share.
Hyderabad and Bengaluru are projected to lead new supply in 2024, with a combined share of 48%. Mumbai is expected to experience a threefold increase in new supply.
“India's office leasing market is experiencing a remarkable surge, driven by strong economic fundamentals, advanced digital ecosystem, higher return to office, and pent-up demand from businesses that delayed expansion plans during the pandemic. We are also witnessing companies prioritizing high-quality spaces with strong ESG credentials and modern amenities, leading to a consolidation in the market and a resurgence of large deals (>100,000 sq ft). While domestic companies continue to show a consistent growth, we're also seeing a notable increase in demand from international businesses”, said Veera Babu, Managing Director, Tenant Representation.