India’s office sector is on an impressive growth trajectory, with Gross Leasing Volume (GLV) reaching 24.8 million square feet (MSF) in Q3 2024. This marks the second-highest quarterly leasing volume in the sector’s history and a notable 66.4% year-on-year (YoY) increase. It also shows a robust 14.3% quarter-on-quarter (QoQ) growth, underlining the resilience and ongoing demand in the market.
The surge in leasing activity is predominantly driven by fresh leasing, which accounted for over 75% of the total GLV in Q3, reflecting significant demand for new office spaces. Net absorption, a key indicator of the expansion of occupied space, reached 12.6 MSF during the quarter—an impressive 32% increase from the previous quarter and a 54.7% increase from the same period last year. Bengaluru led the way with 4.09 MSF of net absorption, followed by Mumbai with 2.6 MSF and Delhi NCR with 1.8 MSF. Pune also saw a substantial rise, with a 68.8% YoY growth in net absorption, reaching 1.5 MSF.
Cushman & Wakefield’s Q3 2024 office data also highlighted a historic low in vacancy rates, which dropped to 17.1%—the lowest recorded in 14 quarters. This sharp reduction of 60 basis points (bps) from the previous quarter indicates a high demand for office spaces across India’s top cities. Notably, Ahmedabad and Mumbai saw the most significant drops in vacancy rates, with reductions of between 180 to 230 bps, followed by Kolkata and Delhi NCR, which experienced declines of 110 to 140 bps.
The data also revealed that the gross leasing volume for the year-to-date (YTD) period has already crossed 66.7 MSF, nearing 90% of the total leasing volume recorded in 2023. The current quarterly run rate of around 20 MSF suggests that the office sector is on track to surpass 80 MSF by the end of 2024, potentially breaking last year’s record and achieving the highest leasing volume in the sector’s history. With net absorption for YTD at 33.67 MSF, the sector is also on course to exceed 43 MSF by year-end, marking a new high.
Despite strong demand, new office supply has been slower to enter the market, with an average of approximately 10 MSF added each quarter during the first nine months of 2024. This represents the slowest supply increase in the post-COVID period. However, even with this limited supply, rental rates across the top eight cities rose by 4-5% YoY. Cities like Mumbai, Chennai, Ahmedabad, and Delhi NCR saw the steepest rental increases, driven by tight vacancy rates in core markets.
Global Capability Centers (GCCs) continued to play a pivotal role in driving demand, contributing 30% of the total GLV in Q3 2024—marking the highest share ever for this segment since 2020. The IT-BPM sector was the largest contributor to GLV, accounting for 32%, followed by flexible workspaces (15%) and BFSI (14%). On a city level, Bengaluru remained the leader, contributing 27.7% to the total GLV, followed by Mumbai (21%) and Delhi NCR (15.1%).
Outlook for the Future
With 2024 already shaping up to be a record-breaking year, industry experts predict that leasing activity will continue to outpace supply in the near future, driving rental growth in key markets. Anshul Jain, Chief Executive, India, Southeast Asia, and APAC Tenant Representation at Cushman & Wakefield, commented, “The strong fundamentals in the market, particularly driven by Global Capability Centers (GCCs), position India as a key hub for innovation and outsourcing. We are likely to see leasing activity surpass 80 MSF this year.”
Veera Babu, Managing Director of Tenant Representation at Cushman & Wakefield, added, “With nearly 90% of last year’s GLV already achieved, we expect demand to continue exceeding supply, particularly in core markets, which could push rental prices higher. While we anticipate an increase in supply, current market conditions suggest that demand will continue to outstrip availability in the coming quarters.”
The Indian office sector is set to remain a strong performer, with both demand and rental rates continuing to rise in the face of limited supply. As India solidifies its position as a key destination for global businesses, the future looks bright for the office leasing market.
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