Bengaluru saw a significant uptake in office space during the second quarter of 2024, with AI and robotics companies leading the charge. According to real estate consultant Vestian’s latest report, these sectors accounted for 21% of the office space absorption in the city, highlighting Bengaluru’s growing role as a hub for technological innovation.

Overall, the IT-ITeS sector, encompassing AI and robotics, comprised 69% of Bengaluru’s total office space absorption during this period. The report, titled “The Connect Q2 2024,” attributes this demand surge to the rapid advancements in artificial intelligence globally and the supportive local ecosystem in Bengaluru.

“Bengaluru led pan-India real estate absorption with a 25% share in Q2 2024, followed by Hyderabad and Mumbai at 20% each,” the report noted. The IT/ITeS sector dominated commercial real estate absorption across India, capturing 38% of the market share in Q2 2024, with the BFSI (banking, financial services, and insurance) and consulting services sectors following closely.

Flexible workspaces also saw a notable increase, representing 8% of the total office space absorption for the quarter. Shrinivas Rao, Chief Executive Officer of Vestian, commented on the overall market performance: “Despite global geopolitical challenges, India’s office markets reported robust real estate activities during Q2 2024. The quarter has already set the tone for robust leasing and construction activities for the current calendar year.”

In the first half of 2024, Grade-A office space absorption across India’s top seven cities exceeded 30 million square feet, marking an 18% increase compared to the same period in 2023. With sustained strong demand, the annual absorption in 2024 is projected to surpass 60 million square feet, potentially matching or exceeding the peak levels seen in 2023.

Commercial real estate absorption in Q2 2024 reached 17.04 million square feet, reflecting a 27% increase over the previous quarter and a 23% rise year-on-year. This growth is attributed to an improved global macroeconomic environment and India’s strong economic performance amidst global geopolitical challenges. “Real estate activities are anticipated to increase further due to strengthened demand from IT-ITeS and BFSI sectors. Flex Spaces are also likely to play a pivotal role in the growth of office markets in India,” Rao added.

New office space completions surged by 17% in the first half of 2024, totalling 23.2 million square feet. Q2 2024 alone saw a 15% quarterly increase and a 10% annual rise. Mumbai led the way with 3.3 million square feet of new completions, marking a staggering 230% quarterly increase. However, new completions in Southern cities like Bengaluru, Chennai, and Hyderabad slightly declined, falling to 57% from 63% in the previous quarter.

Bengaluru continued to lead in new real estate completions with a 28% share in Q2 2024, followed closely by Mumbai. This robust activity underscores the dynamic nature of India’s commercial real estate market, particularly in tech-driven cities like Bengaluru.