Flexible workspaces and the BFSI (Banking, Financial Services, and Insurance) sector emerged as key drivers, accounting for 39% of office space absorption nationwide. This marks a sharp increase from 20% in the previous quarter, underscoring the growing prominence of these sectors. In contrast, the IT-ITeS sector’s contribution to leasing activity fell to 23%, down from 38%, signalling a notable shift in demand dynamics.

Regional Supply Variations

Supply trends varied significantly across major cities. Hyderabad recorded a 25% decline in new office space supply, while Delhi-NCR saw an impressive 360% surge. Bengaluru also experienced a 33% increase in new supply, reinforcing its position as a major hub for office spaces.

Meanwhile, Mumbai’s supply levels remained steady, and Pune witnessed a 26% drop. Kolkata, however, reported no new Grade-A office space additions during the quarter, reflecting stagnation in construction activity in the region.

Southern Cities Lead Leasing Growth

The report highlighted that Southern cities, including Bengaluru, Hyderabad, and Chennai, dominated office space leasing, contributing 61% of the total absorption in Q3 FY24. Bengaluru alone accounted for 36% of the total, up from 25% in the previous quarter. This growth was driven by strong leasing activity in the city’s key micro-markets, reinforcing its leadership in India’s office space landscape.

In contrast, Mumbai’s share of office space absorption declined from 20% in Q2 to 12% in Q3, reflecting reduced demand in the financial capital.

Flex Spaces Gain Traction

The increasing adoption of hybrid work models has fueled demand for flexible workspaces, with operators expanding aggressively to meet businesses’ growing needs. The report noted that flexible spaces are now responsible for a significant share of leasing activity, with rising occupancy levels and tenant lock-ins supporting this growth.

As businesses continue to embrace “core + flex” strategies, the demand for customisable, scalable workspaces is expected to grow, providing operators with significant expansion opportunities.

Market Outlook

Despite the decline in new office space supply, the overall market outlook remains positive, driven by sustained demand and businesses’ evolving needs. The decline in pan-India vacancy rates to 14.8% in Q3 FY24, along with steady absorption levels, reflects the sector’s resilience amid global uncertainties.

The focus on flexible workspaces and the shift in sectoral demand dynamics, particularly the rise of BFSI and flex operators, will likely shape the office market’s trajectory in the coming quarters.