India’s office real estate grew 13% in Q1 2024, reaching 13.40 million sq ft, led by Bengaluru, Chennai, and Hyderabad. Despite a quarterly absorption drop, sectors like IT-ITeS and BFSI thrived. New completions also rose 26% annually, promising a solid year ahead for the market.
The Indian office real estate market has had a promising start to 2024, with a noticeable uptick in demand, particularly in the major southern cities. According to a recent report by Vestian, a US-based workplace solutions firm, overall office space absorption in India rose to 13.40 million square feet in the first quarter of 2024, up from 11.85 million square feet during the same period last year. This represents a 13% increase in absorption year-over-year, although there was a 31% quarterly decline.
Bengaluru, Chennai, and Hyderabad led this surge, collectively accounting for 61% of the total absorption across the country. “2024 started on a positive note as major office markets of India witnessed sustained absorption activities,” noted Shrinivas Rao, CEO of Vestian. He highlighted that despite global economic pressures, India’s office market remains resilient, driven by robust demand in these key cities.
The sector-wise breakdown shows the IT-ITeS sector continuing to dominate the market with a 47% share, followed by BFSI at 11%. Notably, flexible workspaces also see increased interest, accounting for 8% of total absorption, reflecting a shift towards more versatile office solutions post-pandemic.
New project completions have also shown strong performance, with a 26% annual increase, totalling 10.8 million square feet in the first quarter alone. However, new completions had a noticeable quarterly dip of 27%. Bengaluru was at the forefront of new completions with 3.7 million square feet, while Hyderabad followed with nearly 2.5 million square feet of new office supply.
Rao elaborated on the market’s outlook: “Return to Office mandates are likely to renew demand for office spaces across the country and may drive the next wave of growth amid global headwinds.” He also pointed out the significant role of domestic investors who are “bullish about India’s growth story and may contribute significantly to the future growth of office spaces in India.”
The current vacancy level stands at 13.8%, but it is expected to improve in the second half of the year as more companies implement back-to-office mandates. This trend suggests a strengthening market that could see even more excellent absorption and reduced vacancy rates in the coming months.
This robust beginning to 2024 sets a positive tone for India’s office real estate sector, indicating a year that may surpass previous expectations, driven by sustained demand and strategic investments.
