Office leasing records 16.7 mn sq ft in Q1 2024, witnessing a 20% growth y-o-y

Bengaluru continued to contribute the highest to overall office leasing in the country with a share of 27%, followed by Hyderabad at 20%

Despite global uncertainties stemming from uneven economic scenarios and geopolitical tensions, the first quarter of 2024 witnessed office leasing activity of 16.7 mn sq. ft in India, a 20% increase year-on-year even as office space absorption across India’s six major cities is likely to register around 61 mn sq ft in 2024, according to international real estate advisory firm Savills India.

The first quarter of 2024 witnessed office leasing activity of 16.7 mn sq. ft in India, a 20% increase year-on-year, says a Savills India report (Representational photo) (Unsplash)

Bengaluru continued to contribute the highest to overall leasing in the country with a share of 27%, followed by Hyderabad, and Mumbai at 20% and 19%, respectively in Q1 2024.

The tech sector led the leasing activity with 26% share in overall absorption followed by engineering and manufacturing at 18% and BFSI at 15%. The flexible workspace segment constituted 14%, the report said.

New supply saw a decline of 50% YOY with 6.6 mn sq. ft. of completions in Q1 2024. Overall vacancy rate too declined to 15.5% at the end the quarter.

Large deals (100,000 sq. ft. or more) dominate gross leasing activity and contributed 46% to overall transactions.

Mumbai only city to register a rise in new annual supply during the quarter

Bengaluru maintains its strong performance in office space leasing and continues to lead the office demand in the country. In the city’s office leasing landscape, a significant shift is noted this quarter with majority demand emanating from engineering and manufacturing occupiers followed by the tech sector that has been the dominant driver so far. The E&M segment contributed 41% to the city’s leasing activity followed by tech at 30%.

Hyderabad rose prominently and took the number 2 spot in overall office space leasing. The demand was led by healthcare and pharma occupiers with a notable share of 32%, followed by the tech and flexible workspace occupiers.

Mumbai gained market share to jump to third place in terms of gross absorption. The BFSI sector continued to be the conventional and majority demand driver in Mumbai with a 39% share followed by the tech sector garnering a 13% share.

Pune showed a 53% YOY rise in gross absorption to stand at the fourth place, driven by higher office take-up by occupiers in IT-BPM, engineering & manufacturing and BFSI sectors.

Interestingly, IT-BPM sector, which used to be the highest contributor in leasing activity in Delhi-NCR, is replaced by the flexible workspace occupiers with a share of 35% in gross absorption.

“India’s office market recorded its strongest quarterly performance in the last five quarters, with several companies leasing large spaces across the six cities in India. On the back of a strong demand revival in the last three quarters, we expect more deal closures led by tech, BFSI, manufacturing and healthcare industries,” said Naveen Nandwani, Managing Director, Commercial Advisory and Transactions, Savills India.