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The Indian office market reported a net absorption of 11.5 million square feet (MSF) across the top 8 cities in Q1-24 (January-March quarter of 2024), according to office segment data released by Cushman & Wakefield (C&W).
“This is the third-highest level recorded in the last five years, demonstrating a robust appetite for office space among businesses. Net absorption is a barometer of real demand or expansion of occupied space in the market,” the consulting firm said.
While this quarter’s net absorption was 38% lower than the exceptional Q4-2023, it was a 44% increase over Q1 2023, indicating continued space occupation by businesses, it added.
As per data Bengaluru and Mumbai emerged as top markets, absorbing 3.6 MSF and 2.5 MSF of space, respectively. They were followed by Hyderabad at 1.6 MSF, Delhi-NCR at 1.5 MSF and Pune at 1.3 MSF, Ahmedabad and Kolkata at 1 MSF, and Chennai at .8 MSF.
The Gross Leasing Volume (GLV) also remained at over 20 MSF, a rise of 33% on y-o-y basis. Nearly a third of the entire India GLV was recorded in Bengaluru (6.7 MSF), followed by Mumbai (4.8 MSF) with a share of one-quarter. The two cities combined had a share of over 57% in total leasing volumes for the quarter.
Anshul Jain, Chief Executive, India & Southeast Asia and Head of Asia Pacific Tenant Representation, C&W said, “The Indian office market is experiencing a robust momentum. We haven’t witnessed 20 MSF of leasing being recorded for two consecutive quarters in recent history.”
“This strong performance may signal a shift and has the potential to become the new standard for the Indian market. The strong leasing, coupled with net absorption of 11.5 MSF– the third highest in the past five years (the previous being in Q4 2023 and Q2 2019) – signifies a surge in tenant interest for office space,” he said.
“As witnessed in the previous quarters, the impressive surge in office demand is primarily driven by fresh leasing. We are confident that a balanced supply pipeline and continued tenant demand will propel further growth in the Indian office market,” he added.
As per data, fresh leasing continued to dominate GLV with 72% share, with pre-commitments and term renewals taking up the balance 28% in GLV.
Among the sectors, IT-BPM and Engineering & Manufacturing sectors emerged as the major drivers of demand, contributing over 45% to the GLV. The BFSI and Flex Space leasing followed with 17% and 11% shares, respectively.
The first quarter also witnessed close to 13 MSF of new supply. The cities that saw the biggest supply additions were Hyderabad (2.9 MSF), Bengaluru (2.9 MSF) and Delhi-NCR (2.8 MSF). These three, together accounted for over 67% of the total supply in the top-8 cities.
The new supply, coupled with strong absorption, led to a slight decline in the national vacancy rate to 18.1%. Rents across most cities exhibited a slight upward trend C&W said.
