Gross office leasing touches 66.7 mn sq ft in Jan-Sep period, to cross 80 mn sq ft in 2024

Bengaluru, once again, topped the list with 4.09 mn sq ft net absorption, followed by Mumbai at 2.6 mn sq ft and Delhi at 1.8 mn sq ft. Pune also experienced a notable surge, reporting 1.5 mn sq ft – a 2x growth quarter-over-quarter and a 68.8% increase year-over-year, the data showed.

Office leasing across the top eight cities touched a Gross Leasing Volume (GLV) of 24.8 mn sq ft in Q3 2024, marking the second highest quarterly leasing volume in the sector’s history, it showed.

Gross leasing of office space across top eight cities is likely to cross 80 million square feet this calendar year, beating a record 74.5 million square feet during 2023, it said.

The eight cities included Delhi, Kolkata, Mumbai, Ahmedabad, Pune, Chennai, Bengaluru and Pune.

Also Read: Office space leasing touches 53.43 million sq ft in Jan-Sep period: JLL

Gross leasing volume, which factors in all leasing activity in the market, including renewal of contracted terms by corporates, is an indication of overall market activity. This quarter’s surge has been primarily led by fresh leasing, contributing over 75% of the total GLV, indicating high demand for new office spaces across the top 8 cities, the data showed.

Net absorption, which is a barometer of real demand or expansion of occupied space in the market, stood at 12.6 mn sq ft for the quarter across all cities. This reflects a 32% increase quarter-over-quarter and a 54.7% increase year-over-year.

Vacancy rates drop

Cushman & Wakefield’s data also highlighted a historic low in vacancy rates, dropping to 17.1% – the lowest recorded in 14 quarters. This sharp decline of 60 basis points (bps) quarter-over-quarter indicates a thriving demand for office spaces. Ahmedabad and Mumbai experienced the most significant drop in vacancy rates – with reductions between 180-230 bps – followed by Kolkata and Delhi-NCR, with a fall between 110-140 bps, it showed.

Also Read: Led by Bengaluru, office leasing in India expected to touch 80 mn sq ft in 2024: Report

Slower influx of new office supply despite strong demand

Despite this strong demand, the report noted a slower influx of new office supply, with an average quarterly addition of around 10 mn sq ft during the first nine months of 2024 – the slowest addition in supply in the post-Covid period, with YTD 2024 totalling up to 30 mn sq ft.

Coupled with the strong demand, rentals across the top 8 markets also increased by 4-5% y-o-y on average, with cities such as Mumbai, Chennai, Ahmedabad and Delhi-NCR witnessing the steepest rise in rentals, the report showed.

The rise in rentals is also in part attributable to the shortage of supply in the core markets, where the vacancy is yet tighter and averages in single digits. However, with projections indicating a rise in supply in the coming months, the market may be better positioned to meet ongoing demand, it showed.

Global Capacity Centres continue leasing momentum

In terms of the occupiers, Global Capacity Centres (GCCs) continued their leasing momentum with an overall contribution to total GLV standing at 30%. From a sectoral perspective, IT-BPM, flexible workspaces and BFSI were the major contributors towards the quarter’s GLV, with a 32%, 15% and 14% share respectively.

Also Read: Bengaluru leads leasing by Global Capability Centres in India with 40% share between 2022 to H1 2024: Report

On a city level, Bengaluru maintained its strong trajectory by contributing 27.7% to the total GLV of the quarter, followed by Mumbai (21%) and Delhi NCR (15.1%) respectively.

“Strong market fundamentals have sustained extraordinary leasing momentum in the Indian office market, as evidenced by the remarkably low vacancy rates across the top 8 markets. This growth spurred by Global Capability Centers (GCCs) cements India’s status as a key outsourcing hub for innovation and growth. The segment remains highly buoyant with leasing set to breach 80 MSF by this year by a wide margin,” said Anshul Jain, Chief Executive, India, Southeast Asia and APAC Tenant Representation, Cushman & Wakefield.

“The decline in vacancy rates clearly indicates strong demand for office spaces, particularly in light of the limited supply currently in the market. While we expect an increase in supply in the near future, the prevailing market dynamics suggest that demand will likely continue to outstrip availability, potentially driving rental prices higher in key markets,” said Veera Babu, Managing Director, Tenant Representation, Cushman & Wakefield.