The Indian office market is expected to set new records in 2024, with leasing across the top 8 cities expected to surpass 80 million square feet. This would be the first time in the history of Indian offices to reach the 70 million square feet (msf) mark for three years in a row, according to current office report from Cushman & Wakefield. Not just that, cities like Bengaluru, Mumbai, Hyderabad and Kolkata see leasing activity at fresh records.
Due to the fresh demand from multinational corporations, the growth momentum is expected to be maintained throughout the year with 40 msf expected to be leased in the H2 of 2024.The first half (H1) of the year 2024 touched 41.9 million square feet (msf) the highest leasing volume till now, which is 56 per cent of the total gross leasing volume (GLV) for 2023. The significant growth of H1 2024 can be partly attributed to the 2nd quarter of 2024, with the GLV of 21.8 msf across the top 8 cities.
The quick deal closures by global multinationals and domestic companies signify the occupier’s confidence in the market. The growth Gross leasing volume showed a 27 per cent year-on-year (YoY) increase and an 8.4 per cent increase in the previous quarter. The strong leasing momentum is attributed to the consistent quarterly growth as the GLV exceeds the 20 msf mark for the third quarter.
India’s cities saw record leasing activity
Indian metropolitans such as Bengaluru, Mumbai, Hyderabad and Kolkata recorded the highest-ever leasing figure in H1 2024. Bengaluru and Mumbai saw the highest growth of 132 per cent and 71 per cent YoY, followed by Hyderabad and Kolkata.
India’s digital transformation for global multinationals has significantly contributed to the overall share of Global Capability Centers (GCC) transactions., which accounted for 26 per cent of the total GLV in H1 2024. Almost 120 GCC centers were established during that, Bengaluru led the way, accounting for 47 per cent of the leasing by GCC in H1 2024.
High absorption rate signifies the occupier’s confidence
The net absorption anticipated is to cross more than 40 msf, leading the Asia-Pacific region. Net absorption in H1 2024 reached to 46 per cent YoY becoming the highest for any first half since 2020. In the top 8 cities, Bengaluru has the highest share of 29 per cent net absorption in H1 2024. Mumbai, Delhi-NCR, Chennai, and Kolkata recorded their highest biannual net absorption. The positive trend signify the confidence of occupiers in Indian office market particularly from GCC. A tightening market is also indicated by the overall Grade A vacancy rate, which dropped by 40 basis points to 17.7%, the lowest level since Q4 2021.
IT, BFSI major sectors for leasing activity in H1 2024
Leasing activity was still dominated by the IT-BPM industry, which accounted for 26 per cent of GLV in H1 2024. The second-largest contributor, the BFSI sector, saw a notable 60 per cent gain in comparison to H1 2023. Another industry that performed well was engineering and manufacturing, which grew by 31% annually and accounted for 17 per cent of the leasing volume. Operators of flexible workspaces experienced year-over-year growth of 44 per cent, while professional services held a steady share of 10-12 per cent for the previous two years.
Hyderabad and Bengaluru lifts new supply for H1 2024
New supply for H1 of 2024 was at 20.8 MSF. Hyderabad aad Bengaluru together accounted for approximately 51 per cent of the new supply. Hyderabad being the major partner with a 27 per cent share while Bengaluru continued its strong performance.
Hyderabad and Bengaluru are projected to have 48 per cent share making it to lead new supply in 2024. Mumbai is expected to grow three times in new supply, boosting the overall market. Large deals inquiries are expected to accelerate project completions in the second half of the year, with new supply in 2024 forecasted to rise by 19 per cent compared to 2023 levels.