The beginning of 2024 saw robust activity, with total leasing of 13.6 million square feet recorded across the top 6 cities, marking a notable 35 per cent increase compared to last year. Although this represents a significant decrease from the record office space uptake in the final quarter of 2023, the substantial annual rise reflects positive occupier sentiment, particularly considering the typically slower pace in the first quarter, according to a report by report by real estate services firm Colliers.
Bengaluru and Hyderabad emerged as leaders in demand for Grade A office space in Q1 2024, jointly constituting over half of India’s leasing activity. Hyderabad’s office market exhibited strong momentum, witnessing a 2.2x increase in space uptake compared to the corresponding quarter last year, driven by the Healthcare, pharma, and Technology sectors. Mumbai also saw a significant uptick in leasing activity, experiencing an impressive 90 per cent year-on-year rise in Q1 2024, among other major office markets, as per the report.
Speaking about the report’s findings, Arpit Mehrotra, Managing Director, Office Services at India, Colliers, said, “Hyderabad continues to strengthen its role as a prominent commercial office market in the country. The city offers occupiers, including Global Capability Centers, considerable price arbitrage compared to other markets. Furthermore, proactive government policies, continuous infrastructure upgrades and a favourable business ecosystem make Hyderabad a compelling destination for investors, occupiers, and leading developers of commercial real estate in India.”
He added: “Within Hyderabad, the trifecta of Hi-Tec City, Gachibowli and Madhapur continued to drive leasing activity in Q1 2024. Of the 2.9 million square feet of Grade A space uptake in the first quarter, over 80% of the demand was concentrated in these three localities.”
In Q1 2024, new supply across the top 6 cities remained consistent, totalling 9.8 million square feet, nearly matching the level observed in Q1 2023. Bengaluru witnessed notable completions of new projects, accounting for 45 per cent of the total new supply, followed by Hyderabad with a 27 per cent share.
With demand surpassing supply, average rentals experienced an increase of up to 8 per cent year-on-year across most major markets. Meanwhile, vacancy rates are anticipated to remain stable, hovering around 17.3 per cent by the conclusion of Q1 2024.
“Driven by strong domestic occupier activity across Technology and Engineering & manufacturing sectors, the first quarter of 2024 signals a strong start for India’s office market. During Q1, occupiers from Technology, Engineering & Manufacturing, and BFSI sectors collectively accounted for 58% of total leasing activity across the top 6 cities,” said Vimal Nadar, Senior Director and Head of Research at Colliers India.
“This momentum, coupled with the resurgence in GCC demand, sets the stage for the rest of the year. Healthy demand-supply dynamics are likely to prevail throughout 2024. As business sentiments and economic outlook remains positive, domestic occupiers, especially, will continue to drive the office market of the country,” Nadar added.
Throughout Q1 2024, the demand for office space across the top 6 cities remained widespread. Engineering and manufacturing leasing surged to over 2.3 times in Q1 2024 compared to the same period in 2023, totalling 2.8 million square feet. Bengaluru dominated the sector activity, comprising approximately 55 per cent of the total, highlighting occupiers’ sustained favouritism towards the market.
Additionally, BFSI and Flex space maintained robust space uptake across most cities, capturing 14 per cent and 13 per cent share, respectively, in overall leasing activity across India for Q1 2024.