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Office leasing in India is expected to touch 70 mn sq ft on the back of strong leasing activity in major cities by the tech, BFSI, flex workspace, engineering and manufacturing occupiers, a report by Savills India has said.
The third quarter of 2024 saw office absorption hit 20.2 mn sq ft, a 28% increase from Q3 2023. Bengaluru, Delhi-NCR, and Mumbai collectively contributed 66% of the overall leasing activity during this period, it said.
The demand reached 55.1 mn sq ft between January and September 2024, marking a 30% year-on-year (YoY) increase across six major cities, it said.
Also Read: Office leasing up 31% annually to 17.3 mn sq ft across top six cities in Q3 2024; Bengaluru and Hyderabad drive demand
The Year-To-Date (YTD) leasing activity has set a new benchmark for the January-September period, aligning with 2022โs full-year performance. With only 7 mn sq ft remaining to surpass 2023โs total, 2024 is expected to achieve absorption levels in the range of 70-74 mn sq ft, it noted.
Bengaluru witnesses maximum office absorption
Bengaluru recorded 6.2 mn sq ft of absorption in Q3 2024, registering a 48% increase YOY. Large-sized deals (100,000 sq ft and more) continued to dominate the leasing activity, accounting for 67% of the total share. YTD 2024, absorption stood at 15.9 mn sq ft, registering a significant rise of 49% in the corresponding period the previous year. The city is expected to achieve a record gross absorption of about 20 mn sq ft, in 2024, the report noted.
Q3 2024 recorded a significant influx of new supply of 6.2 mn sq ft, representing a 128% increase compared to the previous quarter. The BFSI sector saw a significant rise in demand, contributing 23% to the city’s total market leasing activity in Q3 2024, while the IT-BPM sector continued to be the top contributor with a 46% share, it said.
Delhi-NCR recorded absorption of 4.0 mn sq ft in Q3 2024, registering a 92% YOY increase. YTD absorption stood at 7.6 mn sq ft, registering a decline of 6% when compared with the absorption in the corresponding period in 2023. The region is expected to witness gross absorption of 11-12 mn sq ft in 2024.
In Q3 2024, the region added 0.7 mn sq ft of new supply, bringing the YTD supply to 2.0 mn sq ft. This marks a 17% decrease compared to the 2.4 mn sq ft of supply recorded during the same period (January-September 2023) last year.
Gurugram, with 64% share contributed highest in the leasing activity in Q3 2024. Within Gurugram, Gurugram SBD topped the chart with 49% of the city leasing coming from this micromarket.
Also Read: Gross office leasing touches 66.7 mn sq ft in Jan-Sep period, to cross 80 mn sq ft in 2024
Noida stood second with 27% share in the overall leasing followed by Delhi with 9% share.
The flexible workspace segment led the leasing activity with 50% share in absorption in Q3 2024, followed by the engineering and manufacturing and BFSI sectors with 9% & 7.8% share in the overall leasing activity. Large (100,000 sq ft or more) and mid-sized (25,000-99,999 sq ft) lease transactions dominated the leasing activity in Q3 2024 with 54% & 31% share, respectively.
BFSI sector continues to be the conventional and majority demand driver in Mumbai
Mumbai recorded 3.2 mn sq ft of absorption in Q3 2024, registering a 35% increase YOY. Mid-sized deals (25,000 sq ft to 99,999 sq ft) continued to dominate the leasing activity, with a 36% share. YTD absorption stood at 9.7 mn sq ft, just slightly below the current peak full year 2023 absorption of 10.1 mn sq ft. Mumbai is paving its way to record a decadal peak absorption in 2024 of about 12 mn sq ft.
Mumbai witnessed 1.6 mn sq ft of new supply in Q3 2024, almost double of that witnessed in the corresponding period previous year.
The BFSI sector continued to be the conventional and majority demand driver in Mumbai with a 32% share followed by the tech sector garnering a 17% share in Q3 2024.
Despite a dip in new completions, vacancy levels drop
While demand soared, new office completions slowed down during the first nine months of 2024, with a total of 32.6 mn sq ft added, reflecting a 12% YoY decline. As a result, vacancy rates decreased to 15.5% by the end of September, it said.
Savills India forecasts that leasing activity will reach 70-74 mn sq ft by the end of 2024, representing a 17% increase from last year. New completions are also expected to accelerate, with a projected total of 60-62 mn sq ft, a 22% increase from 2023, as per the report.
Also Read: Bengaluru to dominate India’s commercial real estate market with 330-340 mn sq feet office stock by 2030: Report
โIndiaโs office market reached record-high absorption levels in Q3 of 2024, reflecting strong business sentiment amongst occupiers. With employees returning to physical offices, demand has surged across all segments, including tech. We anticipate this momentum to continue in the last quarter of the year, potentially driving absorption levels to a new record of over 70 mn sq ft in 2024. Demand is likely to be driven by tech, BFSI, flex workspace and engineering and manufacturing occupiers,โ said Naveen Nandwani, MD, Commercial Advisory and Transactions, Savills India.
