Office space transactions touched 71.9 million sq ft in 2024, up by 20.1% annually, with Bengaluru and NCR driving the demand, according to a report by Knight Frank India on January 7.
Bengaluru recorded 18.1 million sq ft of transactions, up by 45% compared to the same period last year. This was followed by NCR with 12.7 million sq ft of transaction at 25% YoY growth and Mumbai with 10.4 million sq ft of absorption at 40% YoY growth. Hyderabad closely followed with 10.3 million sq ft of absorption.
Across the top eight cities, India Facing business anchored the office sector accounting for 36% of total transactions at 25.9 million sq ft, while GCCs represented 31% with 22.5 million sq ft. Flex space operators leased 15.7 million sq ft, a 52% YoY growth. Third-party IT services also saw a 21% YoY increase, reaching 7.9 million sq ft.
Read More: Bengaluru tops office leasing 2024, sees record leasing of nearly 21.8 million sq ft
New office completions also saw a rise reaching 50.3 mn sq ft in 2024 registering a 17% rise YoY. However, the report added that as supply remained subdued compared to leasing volumes, rents firmed up further across all markets over the course of the year encouraged by demand and a relatively lower supply. Hyderabad led the rental growth with 7% YoY followed by Bengaluru and Chennai at 6% YoY respectively in 2024.
“The Indian office market achieved an extraordinary milestone in 2024, recording a remarkable 21% YoY growth and exceeding the pre-pandemic 2019 peak by 19%. This performance is a testament to Indiaโs resilient economic fundamentals and its growing prominence as a global business hub,” Shishir Baijal, Chairman & Managing Director, Knight Frank India, said.
The top eight cities include Bengaluru, Kolkata, Mumbai, NCR, Hyderabad, Chennai, and Ahmedabad.
Read More: Housing sales across top eight cities touch 3.5 lakh-mark in 2024, Mumbai records highest sales
Major cities of Hyderabad and Pune record increase in office vacancy
Hyderabad witnessed an increase in vacancy from 14.9% in the second half of 2023 to 18.3% in the second half of 2024. Similarly, Pune recorded 12.4% vacancy in H2 2024, compared to 6.5% in H2 2023.
“If we look at Hyderabad, it is the only city where we saw a major supply in 2024 surpassing the demand — especially due to the new Floor Area Ration (FAR) regulations changes in the last few years. If we look at a half-a-million sq ft of a transaction, Hyderabad and Pune have several options available today for premium Grade A developments than any other city. Thus we do see a lot of large transactions happening and this will add to the advantage going forward,” Viral Desai, Senior Executive Director at Knight Frank India told HT.com.
In 2024, major developers such as Vasavi, Raheja, Prestige, RMZ, Vamsiram, Kalyani Constructions, Pranava, and Phoenix contributed significantly to Hyderabadโs new office supply, with key areas including HITEC City and Gachibowli among others.
The influx of new space led to a rise in the overall vacancy rate, though vacancy in HITEC City remains lower at 10%, and Grade A buildings show exceptionally strong demand with just 2-3% vacancy. Occupiers have shown a clear preference for Suburban Business District (SBD) locations with 93% of transactions in H2 2024 occurring there, and HITEC City leading with 67% of the transactions.
SBD includes areas like HITEC City, Kondapur, Manikonda, Kukatpally, and Raidurg. CBD includes areas like Banjara Hills and Jubilee Hills.
Flex spaces make a comeback
The report said that the flex segment witnessed its best performance with annual volume growth of 52% in 2024.
The 15.8 million sq ft taken up by flex operators represents a record high for this segment which is particularly encouraging as its market share had slipped toward the end of 2023.
Co-working spaces constituted a substantial 68% of all flex space transacted during 2024 compared to 58% in 2023. More than 50% of the flex workspace takeup was witnessed in two commercial markets – Bengaluru with 4.3 million sq ft and NCR with 3.8 million sq ft.
The growth of flex spaces only accentuated more in H2 2024 with the 8.6 million sq ft taken up by flex space operators translating to a 38% growth in YoY terms from 3.62 million sq ft in H2 2023.