India’s Grade A office space market is on track for a record-breaking year, with leasing demand expected to surpass 70 million square feet in 2024. A recent report by CREDAI, in collaboration with CRE Matrix, highlights a surge in demand during the first quarter of the year, reaching 16.7 million square feet. This marks a 12% increase quarter-over-quarter and a 14% rise year-over-year.

Major Cities Drive Growth

Bengaluru, Mumbai Metropolitan Region (MMR), and Delhi-NCR are at the forefront of this growth, accounting for nearly two-thirds of the total office demand. These top three cities have collectively seen a 23% growth from the previous quarter, showcasing their pivotal role in the commercial real estate market.

Rising Rentals and Larger Deals

Nationwide, market rentals for Grade A spaces are approaching Rs 100 per square foot, with an 8.7% increase in the first quarter of 2024. The disparity between market and existing rental rates has expanded to approximately 14%, indicating a landlord-centric solid market. Notably, Bengaluru, Pune, and Hyderabad have experienced significant rental rate hikes during this period.

More significant deals, defined as leases exceeding 100,000 square feet, have become a key driver of office demand. In the first quarter of 2024, 56% of the demand came from such large deals, a substantial increase from 36% in the previous quarter. Bengaluru, Hyderabad, and Noida accounted for 66% of these large-scale leases.

Sector-Specific Insights

The IT/ITeS sector remains dominant in leasing demand, contributing to 28% of office space requirements. The BFSI sector has also seen a notable rise, increasing its share from 16% in the first quarter of 2023 to 20% in 2024. Mumbai and Chennai alone contributed to half of the demand for goods in the BFSI sector.

“With robust economic fundamentals and substantial investments fueling both physical and digital infrastructure, we project pan-India Grade A office demand to reach 70 million square feet in 2024,” said Boman Irani, President of CREDAI. “This forecast underscores the resilience of the commercial real estate sector and the immense opportunities for developers, corporates, and investors.“

Future Outlook

As market rentals increase in prime areas like NCR, Bengaluru, and Mumbai, more significant deals will shift towards cities like Pune, Chennai, Hyderabad, and Noida, where high-grade spaces are in demand. The upcoming quarters are likely to see growth in office supply completions, with leasing volumes poised to grow as well.

“Rentals in prime markets are increasing, leading to larger deals in secondary cities where occupiers are willing to pay for high-grade spaces,” said Abhishek Kiran Gupta, CEO & Co-founder of CRE Matrix. “The new government’s budget is expected to boost infrastructure and the BFSI sectors, keeping rentals on an upward trajectory.”

With the momentum continuing, India’s office leasing market is set to thrive, driven by strategic investments and a robust economic landscape. The demand for high-quality office spaces is a testament to the country’s growing commercial real estate sector and a beacon of opportunities for all stakeholders involved.