India’s office space leasing is poised to hit a record high in 2024, with demand expected to reach approximately 70 million square feet, according to a report released by real estate consultancy CBRE on Friday. This would surpass the previous peak of 66.6 million square feet achieved in 2019, marking a significant rebound for the country’s commercial real estate sector.
The report, titled CBRE India Office Figures Q3 2024, highlights that the office sector saw a gross leasing of 53.8 million square feet between January and September of this year. This figure represents a 19 percent increase over the same period in 2023, signaling strong market momentum.
“The demand is driven by global and domestic occupiers, who are expected to continue expanding their operations and consolidating their facilities to strengthen their market presence,” said Anshuman Magazine, Chairman and CEO of CBRE for India, South-East Asia, the Middle East, and Africa. He noted that the robust leasing activity is likely to continue well into 2024, with large corporations seeking to optimize their office footprints in key cities.
Tech firms sead office leasing demand
According to the report, technology companies are leading the charge in office leasing, accounting for 23 percent of the total demand. This sector’s ongoing growth is largely driven by global IT firms, Indian technology companies, and startups expanding their operations and setting up new delivery centers. The second-largest segment of office leasing comes from flexible space operators, who made up 19 percent of the total leasing activity, followed by the banking, financial services, and insurance (BFSI) sector at 16 percent.
The July-September quarter of 2024 was particularly noteworthy, with office leasing hitting a year-to-date high of 19 million square feet. In this quarter alone, technology companies held a 19 percent share, followed closely by BFSI firms at 18 percent and flexible space operators at 17 percent. This quarterly performance indicates strong and diversified demand from multiple sectors, reinforcing confidence in India’s office leasing market.
2024 outlook: Tech and Global Capability centres to dominate
CBRE forecasts that the technology sector will continue to dominate in 2024, contributing 25 to 30 percent of the total leasing activity. Anshuman Magazine pointed out that technology companies are increasingly consolidating their real estate assets, aiming for long-term commitments in prime office locations. “We expect to witness a broader demand base this year, with resilient growth from BFSI firms, flexible space operators, and entertainment and media companies (E&M),” he added.
Another critical driver of demand in 2024 will be Global Capability Centres (GCCs), which are expected to account for 35 to 40 percent of total office leasing. GCCs, which are essentially shared services or offshore delivery centers for global firms, have gained significant traction in recent years, particularly in cities like Bengaluru, Hyderabad, and Pune. In the July-September quarter alone, GCCs contributed to 44 percent of all office leasing activity, underscoring their importance in the Indian office space landscape.
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Changing preferences in office space
As companies continue to adapt to new work models, including hybrid working arrangements, the demand for flexible office spaces is also on the rise. The report suggests that flexible workspace operators will remain a crucial part of the leasing market, as firms seek more dynamic and adaptable office environments. Many businesses are turning to flexible office solutions to accommodate workforce fluctuations and evolving workplace preferences. This trend is expected to drive further leasing activity in the flexible workspace segment through 2024.
Challenges and opportunities
While the office leasing market in India shows tremendous potential, it is not without its challenges. The availability of Grade A office spaces in key cities like Mumbai, Delhi-NCR, and Bengaluru is tightening, putting upward pressure on rental rates. Additionally, economic uncertainties, rising interest rates, and global inflation concerns could dampen some of the enthusiasm around leasing activity. However, these factors are unlikely to significantly hinder the overall upward trajectory of office demand in India.
Despite these challenges, the record-breaking leasing projections for 2024 highlight the resilience and growing attractiveness of India’s office market. As businesses continue to expand, particularly in sectors such as technology, BFSI, and GCCs, India is set to remain a global hub for office space demand, with commercial real estate playing a pivotal role in the country’s economic growth.
With 2024 shaping up to be a landmark year for office leasing, all eyes will be on India as it further solidifies its position as a key player in the global commercial real estate market.
