South India, led by Bengaluru, Hyderabad, and Chennai, drives India’s office property market recovery. These cities account for nearly 60% of space demand by 2025, fueled by the tech sector and global capability centres. The office market is booming, with significant growth and large leasing deals expected throughout 2024.
Southern India is at the forefront of the expected recovery in the country’s office property market, with metros like Bengaluru, Hyderabad, and Chennai driving nearly 60% of the total space requirement by the end of 2025. According to real estate management firm JLL, these cities collectively represent more than 66% of the active requests for proposals (RFPs) for 29-30 million square feet of office space in the first quarter of 2024.
“Office demand for the three prime South India markets of Bengaluru, Hyderabad, and Chennai has been quite robust and moving from strength to strength,” said Samantak Das, chief economist and head of research and REIS, India, JLL. “The tech sector is strong in these cities, and the global capability centres (GCCs) have been driving office leasing activities significantly, particularly in Bengaluru and Hyderabad.”
Significant Demand and Key Drivers
The first quarter of 2024 saw a demand for approximately 30 million square feet of new office space, with Bengaluru alone accounting for around 44% of this demand. The tech sector and global capability centres have significantly driven this leasing activity. Companies like QuessCorp, Morgan Stanley, Google, and Amazon are among those driving the resurgence in demand for large office spaces.
“If 2023 was a steady recovery, 2024 is a surge with big deals and RFPs,” said Juggy Marwaha, CEO (office) Prestige Group. “The office market is indeed bouncing back, with the leader in the pack being Bengaluru and the southern cities. MMR and Pune in India are now definitely the ‘office of the world,’ not just the back or front office.”
Strong Market Performance and Future Outlook
Embassy REIT, a significant player in the office property market, continues to see high demand in Bengaluru. The company reports occupancy rates exceeding 90% across its assets and substantial pre-leasing activity from GCCs in its 6.1 million square feet development portfolio. “The office leasing market across India is booming, with significant growth evident in key cities, especially in South India,” said Aravind Maiya, CEO of Embassy REIT. “Markets like Chennai have seen absorption of around 9.4 million square feet, attracting increased interest as multinationals gravitate towards urban centres with abundant talent and a young demographic.”
Over the past two years, the Indian office market has experienced a decrease in demand due to the rise of remote work and companies’ cost-cutting measures. However, the gradual return to office spaces has led to a resurgence in demand. Builders and consultants have observed a significant increase in clients’ need for extensive floor space in the GCC.
Projections and Market Dynamics
Bengaluru, Hyderabad, and Chennai are projected to dominate the demand and supply of office properties. These cities are expected to contribute over 58% of the total demand and around 61% of the supply in 2024 across significant markets. JLL estimates the net absorption of office space to be around 45.1 million square feet, with the supply expected to reach 53.6 million square feet by 2024.
The office property market’s robust recovery, particularly in South India, underscores the region’s strategic importance in commercial real estate. With a strong tech sector, increasing multinational interest, and a young, talented workforce, these southern metros are well-positioned to lead the market in the coming years.
