Office Space Leases To Hit Record High Demand In 8 Major Cities in 2024

Gross leasing of office space across eight major cities is estimated to cross 80 million square feet this year -- an all-time high -- on high demand from corporates, according to Cushman & Wakefield.

However, the net absorption of office demand is likely to remain flat with leasing expected to cross 40 million square feet this year.

In the 2023 calendar year, the gross leasing of office space stood at 74 million square feet while the net office leasing was 41 million square feet across eight major cities -- Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad.

Real estate consultant Cushman & Wakefield on Wednesday released its estimates of office demand for the 2024 calendar year.

"Indian office market is poised for another record-breaking year, with leasing across the top 8 cities anticipated to cross 80 million square feet in 2024," Cushman & Wakefield said.

Commenting on the forecast, Shriram Khattar, Vice Chairman and MD of DLF's Rental business, said, "India offers global competitive advantages." The country has abundant young technical professionals who are aspiring to grow and quality real estate at a fraction of occupancy costs, he said.

"These twin advantages are driving global companies to establish and grow in India," Khattar said.

He noted that these companies look for Grade A office space from credible developers who offer the best of services and expansion options at premium locations.

Cushman & Wakefield said the first half of 2024 recorded 41.9 million square feet of office leasing, driven by fresh demand from multinational corporations, the optimisation of pre-leased buildings in key cities and a higher return to the office.

The consultant expects the market to maintain its strong momentum throughout the year with over 40 million square feet expected to be leased in the second half.

Net absorption in the first half (January-June) 2024 also reached new heights, recording a 46% year-on-year growth.

The momentum is expected to continue with net absorption anticipated to cross more than 40 million square feet in 2024.

The overall Grade A vacancy rate decreased by 40 basis points to 17.7%, the lowest since the fourth quarter of 2021, further indicating a tightening market.

The IT-BPM sector continued to dominate leasing activity, contributing 26% of the gross leasing in the first half of 2024.

The BFSI sector followed as the second-largest contributor.

Veera Babu, Managing Director of Tenant Representation, said, "India's office leasing market is experiencing a remarkable surge, driven by strong economic fundamentals, advanced digital ecosystem, higher return to office, and pent-up demand from businesses that delayed expansion plans during the pandemic."

He said the companies are prioritising high-quality spaces with strong environmental, social and governance credentials and modern amenities, leading to a consolidation in the market and a resurgence of large deals (>100,000 sq ft).

"While domestic companies continue to show consistent growth, we're also seeing a notable increase in demand from international businesses attracted to India's dynamic economy and supportive business environment," said Veera Babu.

This confluence of factors has fueled a significant surge in leasing activity in the first half of 2024, he said, and anticipated this year to set a new record for office leasing in India.

"India's unique combination of a skilled talent pool, a tech-friendly environment, and ongoing infrastructure development, has firmly established it as a premier destination for global capability centres," Anshul Jain, Chief Executive - India, Southeast Asia and Asia Pacific Tenant Representation, said.

He said there is a surge of interest from companies across various sectors, not just technology or large corporations, eager to establish their presence in the Indian market.

"This trend is evident in the first half with the addition of 120 new GCC centres, contributing to approximately 26% of the total GLV share. The positive sentiment among occupiers, particularly GCCs, coupled with a healthy pipeline of quality office supply, sets the stage for a record-breaking year. We anticipate that 2024 GLV will surpass the historic milestone of 80 million square feet, underscoring the sustained strength and potential of India's office market," Jain said.

Gross leasing means all leasing activity in the market, including renewals of contracted term by corporates.

Net absorption means new space occupied during the period (quarter/year), adjusted for exits, if any.