India’s office space sector reached a new high in 2024, with transactions surpassing 71.9 million square feet—a 20.1% annual growth, according to a report by Knight Frank India. Bengaluru and the National Capital Region (NCR) emerged as key drivers of this demand, supported by robust economic fundamentals and global business interest.

Bengaluru recorded an impressive 18.1 million sq ft in transactions, marking a 45% year-on-year (YoY) growth. NCR followed with 12.7 million sq ft, up by 25% YoY, while Mumbai showed a 40% YoY growth, with 10.4 million sq ft of space absorbed. Hyderabad closely trailed with 10.3 million sq ft of leasing activity. “The Indian office market achieved an extraordinary milestone in 2024, recording a remarkable 21% YoY growth and exceeding the pre-pandemic 2019 peak by 19%,” said Shishir Baijal, Chairman & Managing Director of Knight Frank India.

Flex Spaces and IT Services Dominate Growth

The rise in flexible workspaces was a standout trend in 2024, with flex space operators leasing a record-breaking 15.8 million sq ft—a 52% YoY growth. These operators now account for 68% of all flex space transactions, a significant increase from 58% in 2023. Bengaluru and NCR contributed over 50% of this demand, with 4.3 million sq ft and 3.8 million sq ft, respectively.

Co-working solutions have been particularly attractive for businesses adapting to hybrid work models. The second half of 2024 saw flex space transactions grow by 38% YoY, highlighting its resilience and increasing relevance in a changing work environment.

Supply and Vacancy Trends

New office completions totalled 50.3 million sq ft in 2024, a 17% increase YoY. Despite the increased supply, demand outpaced availability, increasing rental rates across key markets. Hyderabad led the rental growth at 7% YoY, followed by Bengaluru and Chennai at 6% YoY.

Hyderabad also witnessed a significant rise in vacancy rates, climbing to 18.3% in the second half of 2024 from 14.9% in 2023. Pune followed a similar trend, with vacancies increasing to 12.4% from 6.5% YoY. According to Viral Desai, Senior Executive Director at Knight Frank India, the oversupply in Hyderabad can be attributed to changes in Floor Area Ratio (FAR) regulations, leading to an abundance of premium-grade developments in areas like HITEC City and Gachibowli.

Future Prospects in Prime Locations

Occupiers have strongly preferred Suburban Business Districts (SBDs), such as HITEC City, which accounted for 67% of Hyderabad’s transactions in H2 2024. Grade A buildings in these areas remain in high demand, with vacancy rates as low as 2-3%.

Major developers like Vasavi, Raheja, and Prestige have been instrumental in meeting this demand. Despite the higher vacancy in the overall market, SBD locations have continued to attract tenants with their premium offerings and strategic locations.

A Promising Outlook

As India cements its status as a global business hub, the commercial real estate sector continues to flourish. With resilient economic fundamentals and the rise of hybrid work models driving demand for flex spaces, the future looks promising for India’s top markets, particularly Bengaluru, NCR, and Hyderabad.