Office space leasing in India off to a strong start in Q1-2024

The demand for office spaces during the first quarter of 2024 has been strong, registering total leasing of 13.6 million square feet across the top six cities. It is a remarkable 35 per cent increase compared to the same period last year, according to professional services and investment management company Colliers.

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, Colliers said in a report.

Bengaluru and Hyderabad emerged as frontrunners for demand of Grade A office space in the first quarter of 2024, cumulatively accounting for more than half of the India leasing activity.

The office market of Hyderabad saw 2.2x space uptake in Q1 2024 as compared to the corresponding quarter last year. This demand was driven by healthcare and pharma and technology sectors.

Amongst other major office markets, Mumbai too experienced a notable surge in leasing activity, an impressive 90 per cent yearly 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," said Arpit Mehrotra, Managing Director, Office services, India, Colliers.

"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 per cent of the demand was concentrated in these three localities," said Mehrotra.

During Q1 2024, new supply across top six cities remained steady, at 9.8 million square feet, almost at par with the level seen in Q1 2023.

According to Colliers, Bengaluru witnessed significant new project completions, contributing to 45 per cent of the total new supply, followed by Hyderabad at 27 per cent share. With demand outpacing supply, average rentals saw up to 8 per cent uptick on a yearly basis across most of the major markets.

"As business sentiments and economic outlook remains positive, domestic occupiers, especially will continue to drive the office market of the country," said Vimal Nadar, Senior Director and Head of Research, Colliers India.

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