Strong Start for Office Space Leasing in India’s Top Cities in Q1-2024

Overview

The demand for office spaces in India during the first quarter of 2024 has shown remarkable strength, witnessing a total leasing activity of 13.6 million square feet across the top six cities. This represents a notable 35 per cent increase compared to the same period last year, as reported by professional services and investment management company Colliers.

Market Dynamics

Although this quarter marks a significant drop from the record office space take-up observed in the final quarter of 2023, the substantial annual surge reflects upbeat occupier sentiment. Traditionally, the first quarter tends to be slower, making the surge even more noteworthy, as highlighted in Colliers’ report.

Regional Highlights

Bengaluru and Hyderabad emerged as frontrunners in the demand for Grade A office space during Q1-2024, collectively accounting for more than half of India’s leasing activity.

In Hyderabad, the office market witnessed a notable 2.2x increase in space uptake compared to the corresponding quarter last year, driven primarily by the healthcare, pharma, and technology sectors.

Mumbai’s Surge

Mumbai also experienced a significant surge in leasing activity, witnessing an impressive 90 per cent yearly rise in Q1-2024.

Expert Insights

Arpit Mehrotra, Managing Director of Office Services, India, at Colliers, emphasized Hyderabad’s growing prominence in the commercial office market. He attributed this to factors such as considerable price arbitrage, proactive government policies, infrastructure upgrades, and a favorable business ecosystem.

Mehrotra further highlighted the significance of key localities within Hyderabad, namely Hi-Tec City, Gachibowli, and Madhapur, which continued to drive leasing activity during Q1-2024.

Supply Dynamics

In terms of new supply across the top six cities, Q1-2024 saw a steady supply of 9.8 million square feet, nearly on par with levels seen in the same period last year. Bengaluru accounted for 45 per cent of total new supply, followed by Hyderabad at 27 per cent.

Rental Trends

With demand surpassing supply, average rentals experienced an upswing of up to 8 per cent on a yearly basis across most major markets.

Future Outlook

Vimal Nadar, Senior Director and Head of Research at Colliers India, expressed optimism about the future trajectory of the office market, particularly driven by positive business sentiments and economic outlook. Domestic occupiers, in particular, are expected to continue fueling the country’s office market.