Indian businesses are increasingly transitioning from owning office spaces to leasing, embracing this model for its flexibility and cost-effectiveness. This strategic shift allows companies to scale operations, optimise space utilisation, and maintain agility in a dynamic business environment. Sectors like technology, e-commerce, and BFSI are leading the charge, leveraging leasing as a tool to adapt to rapidly changing market conditions.

Recent data underscores this trend. In Q3 2024, India’s top eight cities recorded a gross leasing volume (GLV) of 24.8 million square feet (MSF), reflecting a 66% annual growth and a 14% increase over the previous quarter, according to reports from Cushman & Wakefield and CBRE. Bengaluru dominated the market with a 28% share of the GLV, followed by Mumbai (21%), Delhi NCR (15%), and Hyderabad (14%). The IT-BPM sector accounted for 32% of the leasing activity, while flexible workspaces, driven by hybrid work models, comprised 15%. BFSI contributed 14%, highlighting the growing importance of adaptability in commercial real estate.

Domestic firms are playing a significant role in this transformation. Traditionally led by multinational corporations, the office leasing market has seen a surge in activity from Indian companies, which now account for 47% of overall leasing activity between 2022 and mid-2024. This shift marks a departure from global corporations’ dominance and highlights the evolving priorities of Indian businesses. Predictions indicate domestic firms will lease 60-65 million square feet of office space in 2024-2025.

Bengaluru and Hyderabad remain hotspots for office leasing, with e-commerce and life sciences sectors driving demand in these cities. In Q3 2024, new completions totalled 10 million square feet, with Bengaluru and Hyderabad contributing 75% of the total. Net absorption for the quarter reached 12.6 million square feet, a 55% increase from the previous year, reflecting robust demand for high-quality office spaces.

Real estate developers respond to these changes by creating flexible, tech-driven office spaces tailored to modern business needs. “The rapid expansion of India’s startup ecosystem and growth in sectors like technology, life sciences, and BFSI are fueling this demand,” stated a CBRE report. Advanced technologies, including AI and IoT, are transforming leased spaces into smarter, more cost-effective environments, enhancing their appeal.

The future of India’s office leasing market looks promising. Factors like the rise of hybrid work models, the expansion of STEM-driven industries, and advancements in smart building technologies are expected to sustain and accelerate demand. Leasing provides businesses with operational flexibility and the ability to scale efficiently, making it a cornerstone of India’s evolving commercial real estate landscape.