The office space leasing market is expected to gain significant momentum in 2024, mainly driven by technology. Experts highlight that companies across various sectors are expanding their office spaces, boosting the demand for commercial real estate. “In the technology sector, expansion of office spaces is happening in recent quarters. We are seeing positive momentum from the beginning of the year,” said Satish BN, Founder and Managing Director of real estate consultancy firm Skydealz, in an interview with Bizz Buzz.

According to a report by CBRE, office leasing reached a record four-year high in 2023 with a gross absorption of 61.6 million sq ft across nine key cities. The banking, financial services, insurance (BFSI) and technology sectors were the primary drivers of this high office space absorption. Cities like Bengaluru, Delhi-NCR, Hyderabad, Chennai, and Pune will remain the key growth drivers 2024.

A significant trend is the expansion of Global Capability Centres (GCCs) or technology captives of large multinational corporations, which have emerged as significant office leasing entities within the offshoring industry. “The Indian offshoring market has evolved into a significant occupier in India’s office space, leasing over 46 per cent of office space in 2023, with GCCs being the biggest offshore occupier,” noted a report from real estate consultancy firm Knight Frank. The report highlighted that India’s offshoring market witnessed an overall leasing volume of 27.3 million sq ft in 2023, a significant increase of 26 per cent from the previous year.

The GCC landscape in India has grown significantly, with over 1,580 centres across the nation in 2023. This growth is not limited to GCCs alone; IT services companies also drive the overall office leasing market. “Cities like Bengaluru and Hyderabad are witnessing more interest from enterprises in leasing office spaces,” added Satish BN.

Another notable trend is the growing preference for premium office spaces. Companies are willing to pay higher rent for superior-quality offices, which facilitate talent acquisition. This trend is evident in locations such as MG Road in Delhi NCR (18.2% YoY), SBD1 in Bengaluru (15.5% YoY), and Pallavaram Thoraipakkam Road in Chennai (10.9% YoY). The infusion of high-end, quality supply and robust demand have driven these increases.

The Colliers report also outlines strategies for achieving cost efficiency in office real estate. Aligning office strategy with business goals is crucial, with decisions around owning versus leasing tailored to location objectives and the expected length of requirement for each office. A portfolio strategy involves consolidation opportunities, monetising non-core assets, and right-sizing and repurposing offices to match new working methods.

The report also suggests maximising lease negotiations by considering shorter-term and coworking options to minimise upfront costs and renegotiate leases and contracts. Leveraging technology to automate routine tasks and track space utilisation can enhance operational efficiency. Prioritising energy-efficient systems and upgrades is crucial for long-term cost savings, with an emphasis on sustainability initiatives and green building practices. Driving employee engagement and satisfaction by ensuring a positive work environment can also boost productivity.

As the commercial real estate market continues to evolve, the willingness of occupiers to invest in high-quality office spaces is expected to shape the dynamics of the office leasing market in India and across the Asia Pacific region in 2024. This trend reflects the increasing importance of a quality work environment and strategic location in attracting and retaining top talent.