Domestic firms projected to lease 60-65 mn sq ft of office space in 2024-25: Report
Indian firms saw a 60% rise in office space absorption between 2022-23, compared to 2018-2019, led by Delhi-NCR, Bengaluru and Mumbai.
Reflecting a shifting trend in India’s commercial real estate segment, domestic firms are expected to lease 60-65 million square feet of office space in 2024-25, thus challenging the historical dominance of global corporations, particularly from the US, a report by property consultancy CBRE noted.
The report credited government initiatives, increased profitability, a well-capitalized banking sector, talent pool and a burgeoning startup ecosystem in the country for the feat.
According to the report, between 2022 to H1 2024, domestic companies accounted for nearly 47% of overall office leasing activity in the country.
During 2022-23, domestic firms witnessed a 60% increase in office space absorption compared to the two pre-pandemic years of 2018-2019, it said.
“Major occupier groups acquired substantial spaces in prime locations across key cities, with Delhi-NCR leading the way, followed by Bengaluru and Mumbai,” the report highlighted.
Meanwhile Bengaluru and Hyderabad saw increased occupancy by e-commerce and life sciences firms, respectively. Mumbai on the other hand bagged a 43% share of domestic BFSI leasing, bolstered by substantial contributions from Delhi-NCR and Chennai during 2018 – H1 2024, the report said.
“As India’s major urban centers continue to grow and diversify, the demand for premium office spaces will shape the future of the commercial real estate market, setting new standards for innovation and excellence. India's top nine cities are poised to see an impressive addition of approximately 185 million square feet of premium office space by 2026,” said Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East and Africa, CBRE.
Key drivers: Flexible space operators, technology and BFSI sectors
The report highlighted that in recent years, the office leasing landscape in India has been predominantly driven by three key sectors: Flexible space operators, BFSI (banking, financial services, and insurance), and technology firms. They have collectively accounted for two-thirds of all domestic office leasing activity, per the report.
Going forward, this trend is expected to sustain alongside the increasing contribution of other sectors such as research, consulting and analytics with services spanning across legal, taxation, HR and media domains, among others.
Also Read: Bengaluru leads in large office space leasing, transaction volumes touch 4.5 mn sq ft in H1 2024
Meanwhile, Indian engineering and manufacturing firms, which currently represent 7-8% of domestic office leasing, are anticipated to expand their footprint, including into Tier-II and Tier-III cities that are emerging as new manufacturing hubs. Similarly, homegrown retail and FMCG companies, currently accounting for 1-2% of domestic office leasing, are expected to increase their office space take up as well.
The report further stated that about 86% of the domestic occupiers would pursue ‘flight-to-quality’ leasing over the next two years, spawning the need for such quality spaces.
Meanwhile about 57% of the domestic firms intend to use flexible spaces over the next two years, providing an impetus for flexible space operators to further expand their reach. The flexible space stock is expected to touch 80 million square feet in 2024.