Q1 2024 off to a strong start; Office leasing surges by 35% YoY to 13.6 msf


Bengaluru and Hyderabad drove India demand and supply, with cumulative share of 51% and 71% respectively. Technology led leasing during Q1 2024 at 23% share, followed by Engineering & manufacturing at 21% share. Vacancy levels remained rangebound; rentals rose up-to 8% YoY across major markets.

The first quarter of 2024 has started on a strong note, registering total leasing of 13.6 million square feet across the top 6 cities, marking a remarkable 35% increase compared to the same period last year. Although this is a significant drop from the record office space take-up in the last quarter of 2023, the remarkable annual increase is indicative of upbeat occupier sentiment, given the fact that the first quarter is typically slower.

Bengaluru and Hyderabad emerged as frontrunners for demand of Grade A office space in Q1 2024, cumulatively accounting for more than half of the India leasing activity. The office market of Hyderabad especially demonstrated a strong momentum with 2.2x space uptake in Q1 2024 as compared to the corresponding quarter last year. This demand was driven by Healthcare & Pharma and Technology sectors. Amongst other major office markets, Mumbai too experienced a notable surge in leasing activity, an impressive 90% YoY rise in Q1 2024. 

“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 favorable business ecosystem makes Hyderabad a compelling destination for investors, occupiers, and leading developers of commercial real estate in India. 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.” says Arpit Mehrotra, Managing Director, Office services, India, Colliers.

Trends in Grade A gross absorption (in million sq feet)

Gross absorption does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.

During Q1 2024, new supply across top 6 cities remained steady, at 9.8 million square feet, almost at par with the level seen in Q1 2023.  Bengaluru witnessed significant new project completions, contributing to 45% of the total new supply, followed by Hyderabad at 27% share. With demand outpacing supply, average rentals saw up to 8% uptick on a YoY basis across most of the major markets. Vacancy levels, meanwhile, are expected to remain steady, hovering around 17.3% by the end of Q1 2024.

Trends in Grade A new supply (in million sq feet)

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.

Technology, Engineering & Manufacturing and BFSI sectors drove space uptake in 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. 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.” says Vimal Nadar, Senior Director and Head of Research, Colliers India.

During Q1 2024, the demand for office space across the top 6 cities continued to remain broad-based. At 2.8 million square feet, Engineering & manufacturing leasing soared to over 2.3x times in Q1 2024 compared to the first quarter of 2023. Bengaluru accounted for about 55% of the activity in the sector, underscoring occupiers’ continued preference for the market. BFSI and Flex space too continued their healthy space take up across most cities, garnering 14% and 13% share, respectively in overall India leasing for Q1 2024.

Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.

Subscribe our YouTube Channel @  https://bit.ly/2tDugGl


Comments are closed.