In a significant shift within India’s commercial real estate sector, domestic companies are projected to lease 60-65 million square feet of office space in 2024-25, according to a report by property consultancy CBRE. This marks a departure from the historical dominance of global corporations, particularly US-based firms, in the Indian market.

The report attributes this surge in domestic leasing activity to several factors, including government initiatives, a well-capitalized banking sector, increased profitability, and a growing talent pool fueled by India’s burgeoning startup ecosystem. Between 2022 and the first half of 2024, domestic firms accounted for nearly 47% of overall office leasing activity, challenging the previous global trends.

“Major occupier groups have acquired substantial spaces in prime locations across key cities, with Delhi-NCR leading the way, followed by Bengaluru and Mumbai,” the report noted. Bengaluru has seen increased demand from e-commerce companies, while Hyderabad has attracted life sciences firms. Mumbai, meanwhile, holds a significant share of domestic BFSI (banking, financial services, and insurance) leasing, claiming 43% of the sector’s occupancy.

Anshuman Magazine, Chairman and CEO of India, Southeast Asia, Middle East, and Africa at CBRE, remarked, “As India’s major urban centres continue to grow and diversify, the demand for premium office spaces will shape the future of the commercial real estate market, setting new standards for innovation and excellence.” He added that India’s top nine cities are expected to add approximately 185 million square feet of premium office space by 2026.

The report highlights three key sectors—flexible space operators, BFSI, and technology—as the primary drivers of domestic office leasing in recent years. Collectively, these sectors account for two-thirds of all leasing activity. This trend is expected to continue, with contributions from other sectors such as research, consulting, and analytics on the rise.

Additionally, Indian engineering and manufacturing firms, representing 7-8% of domestic office leasing, are poised to expand further into Tier-II and Tier-III cities, emerging as new manufacturing hubs. Similarly, homegrown retail and FMCG companies, which currently account for 1-2% of leasing, are expected to increase their office space take-up in the coming years.

About 86% of domestic occupiers are expected to pursue ‘flight-to-quality’ leasing over the next two years, driving the need for premium office spaces. Flexible spaces will also play a crucial role in this shift, with 57% of domestic firms planning to adopt flexible workspaces by 2024. The flexible space stock is forecasted to reach 80 million square feet by the same year, further fueling coworking and flexible office market growth.