The Indian office market is experiencing a strong resurgence in 2024, with annual gross leasing across the top six cities reaching 47 million square feet by Q3—a 23% year-on-year increase. Bengaluru and Hyderabad led this growth, contributing nearly half of the leasing activity between January and September. For the first time, the annual absorption of Grade A office spaces is projected to surpass 60 million square feet, a testament to the market’s vitality.

This growth is driven by demand from diverse sectors. While tech occupiers are stabilising, they still account for 25% of overall leasing. Meanwhile, flex spaces are rising, expected to make up 20% of demand in top cities. As businesses adapt to hybrid models, demand for flexible and managed office spaces is reshaping the commercial real estate landscape.

Supply trends mirror this robust demand, with 37.4 million square feet of new space completed by Q3 2024. Completions in Bengaluru and Hyderabad remain the highest, and the total new supply for the year is expected to surpass 50 million square feet. Rentals are projected to grow by 5–10% annually across major cities, reflecting the market’s bullish outlook.

Shifting Dynamics in 2025

Looking ahead to 2025, the office market is set to solidify its performance. Adopting the “Core + Flex” model, combining traditional and flexible office setups, will drive leasing activity as businesses prioritise agility and cost-effectiveness. “Strong domestic growth prospects and positive economic indicators will sustain occupier and developer confidence,” industry analysts predict.

BFSI (banking, financial services, and insurance) and engineering & manufacturing sectors are expected to dominate, accounting for 35–40% of total demand. Technology firms will continue to embrace hybrid working, contributing 25–30% of leasing activity. Global Capability Centers (GCCs) are also likely to expand, driving 40–50% of Grade A leasing as state governments introduce supportive policies.

Expanding Horizons: Tier-II and Tier-III Cities

The decentralisation trend is accelerating, with businesses increasingly eyeing Tier-II and Tier-III cities. Cities like Bhubaneswar, Coimbatore, Indore, and Jaipur are becoming attractive alternatives, thanks to lower operating costs, skilled talent availability, and infrastructure upgrades. This shift is expected to boost leasing activity in smaller cities significantly.

Flex spaces will continue their transformation from niche to mainstream. Industry leaders are expanding portfolios into emerging cities, and some operators are adopting asset-heavy models, acquiring properties to strengthen their presence. Flex operators will account for 20% of overall leasing activity in 2025.

Sustainability Leads the Way

Sustainability is shaping the future of commercial real estate. Nearly 80% of the upcoming supply over the next 2–3 years is expected to be green-certified, driven by efficiency gains and compliance needs. Existing office stock, especially those under 10 years old, also holds the potential for cost-effective upgrades to meet environmental standards.

With the office market breaking records in 2024 and expanding horizons in 2025, India is poised for sustained growth. Strong demand, innovation in flexible spaces, and a focus on sustainability are redefining the contours of the country’s commercial real estate landscape.