Global firms bet big on India as office market records highest-ever leasing

India's Tier I cities see rising office rents as global markets face decline.

As much of the world grapples with a slowdown in the office rental market—marked by declining rents, oversupply, and cautious tenant behavior—India is moving against the tide. Cities like Bengaluru, Mumbai, Pune, and Delhi-NCR are not only maintaining their rental momentum but in many cases, accelerating it. The contrast is stark: while office rental markets in parts of the US, UK, and Europe have begun to plateau or even soften, India's metros are experiencing double-digit rent hikes, surging occupancy levels, and strong tenant demand, shows data analysed by Vestian,  an occupier-focused workplace solutions firm.

 

According to research by Vestian, 2024 reported the highest ever leasing of 70.7 Mn sq ft in India's office sector, registering an annual increase of 16%. Sub-dollar rentals across India’s top seven cities fuelled this momentum, making the country a key outlier in an otherwise subdued global landscape.

 

 

"In stark contrast to major global cities like New York, Seattle, Boston, Hong Kong, and Shanghai, which have witnessed rental declines over the last five years, India witnessed a steady upward movement. Notably, while some Western markets such as London and Miami posted increases of 31% and 53% respectively, the broader global sentiment reflects a slowdown due to rising vacancy rates and rapidly changing workplace strategies," said the report.

 

Furthermore, in 2024 alone, rental rates in Indian cities surged between 3.8% and 8.2% compared to the previous year. India remains resilient, driven by strong demand from the IT sector and Global Capability Centers (GCCs).  While global cities continue to see demand for premium office spaces, India’s affordability and expansion-driven leasing set it apart. As a cost-effective hub, India is poised for steady growth. 

Average Office Rentals (USD/sq ft/month) 

   

Prime commercial hubs like Mumbai's BKC and Delhi's central business district (Connaught Place and adjoining area) command high rentals, with average rent reaching $3-4 per sq ft a month. Strong economic activities, upcoming mega infrastructure projects, and the expansion of Global Capability Centers (GCCs) continue to drive rental appreciation across the major cities of India.

 

Bengaluru: The poster child of India’s rental revival, with 15–20% year-on-year growth in many micro-markets. Areas like Whitefield, Sarjapur Road, and Bellandur are seeing unprecedented demand from tech professionals.

 

Mumbai: Despite being India’s most expensive rental market, demand hasn’t slowed. South Mumbai and BKC continue to attract high-income tenants, while suburbs like Thane and Navi Mumbai are booming due to affordability and connectivity.

 

Delhi-NCR: With strong demand from corporate professionals and returning students, areas like Gurugram and Noida are seeing rental appreciation, particularly in sectors with good metro access.

 

What has led to this surge? 

 

"The influx of new businesses and company expansions has led to significant demand for office spaces in India. Global firms are aggressively seeking office space in India due to robust economic growth compared to other major economies of the world, rich demographic dividend, large consumer base, rapid urbanization, and the easy availability of skilled workforce at competitive rates, particularly in technology and finance. This demand is driving the need for high-quality office spaces," said Shrinivas Rao, CEO of Vestian.

 

Why has there been a decline in office rentals in other global markets? 

The decline in office space rents in the global market is influenced by the emergence of technologies like generative AI, as well as changes in office space utilization strategies, as per Rao. These factors contribute to the uncertainties faced by the office sector. The combination of reduced demand, along with businesses downsizing or relocating, has led to higher vacancy rates globally, which in turn puts downward pressure on rents.