The first quarter of 2024 has shown promising results for India’s office space market, with a total leasing of 13.6 million square feet across the top 6 cities. This marks a significant 35% increase compared to the same period last year.
Bengaluru and Hyderabad Lead the Demand for Grade A Office Space
Bengaluru and Hyderabad have emerged as the frontrunners for the demand of Grade A office space in Q1 2024, together accounting for more than half of India’s leasing activity. Hyderabad, in particular, has shown strong momentum with a 2.2x increase in space uptake compared to the corresponding quarter last year. This surge in demand has been driven by the Healthcare & Pharma and Technology sectors.
Hyderabad’s Growing Role in the Commercial Office Market
“Hyderabad continues to strengthen its role as a prominent commercial office market in the country,” according to Arpit Mehrotra, Managing Director, Office services, India, Colliers. He highlights the city’s considerable price arbitrage, proactive government policies, continuous infrastructure upgrades, and a favorable business ecosystem as factors that make Hyderabad an attractive destination for investors and occupiers. The localities Hi-Tec City, Gachibowli, and Madhapur have been driving the leasing activity in Q1 2024, accounting for over 80% of the demand for Grade A space in Hyderabad. During the first quarter, new supply across the top 6 cities remained steady at 9.8 million square feet, similar to that of Q1 2023. Bengaluru saw significant new project completions, contributing to 45% of the total new supply, followed by Hyderabad at 27% share. With demand exceeding supply, average rentals witnessed an uptick of up to 8% on a YoY basis across major markets.
Industry Sectors Driving Office Space Leasing
In Q1 2024, the overall demand for office space remained broad-based across the top 6 cities. Engineering & Manufacturing leasing soared to over 2.3x times compared to the first quarter of 2023, reaching 2.8 million square feet. Bengaluru accounted for 55% of the sector’s leasing activity, highlighting its appeal to occupiers in this industry. The BFSI sector and flex space leasing also showed healthy growth, garnering 14% and 13% shares, respectively, in the overall leasing for Q1 2024.
Positive Outlook for the Rest of the Year
Vimal Nadar, Senior Director and Head of Research, Colliers India, predicts healthy demand-supply dynamics throughout 2024. He states, “As business sentiments and economic outlook remain positive, domestic occupiers, especially, will continue to drive the office market of the country.” With the impressive start in Q1 2024, the office space market in India is expected to maintain momentum, fueled by increasing demand from various sectors and growing confidence in the business landscape.
