Office rents across all major Indian cities surpass pre-pandemic levels in 2024, notes a new report
Oct 23, 2024, 16:07 IST
After a steep nosedive in demand for office space rentals during 2020 and 2021, a new Colliers report has now noted that office rentals across six major Indian cities have finally rebounded to their pre-pandemic levels and even inched around 2-8% higher.
While some cities like Hyderabad and Pune had already gone beyond their pre-pandemic rental levels as early as 2022, Bengaluru and Chennai had followed suit a year later in 2023.
The last to join the bandwagon were Delhi NCR and Mumbai, which finally managed to breach their pre-pandemic levels in 2024. However, both Delhi and Mumbai recorded the highest jump in average rentals at 8% each, followed by Mumbai and Chennai, which saw hikes of about 5-6% during this period.
The recovery in demand for office spaces, which kicked off in 2022, has stayed steady since. Arpit Mehrotra, Managing Director, Office Services, India, Colliers notes that going ahead, the annual increase in average quoted rentals at the end of 2024 is likely to be higher for certain cities like Delhi NCR and Pune, as compared to other markets.
"Moreover, as demand scale-up in Indian commercial real estate solidifies, notwithstanding unforeseen events, annual space take up to the tune of 60 million sq ft is likely to be the new norm in the medium-term," he added.
IOMR Zone 1 in Chennai and Bandra-Kurla Complex, Goregaon, and JVLR in Mumbai saw rents surge by around 10-20% from pre-pandemic levels between 2019 and 2024. In contrast, rental rates in Chennai and Mumbai grew at around 5% and 6%, respectively.
In Hyderabad, SBD, or the Secondary Business District, which comprises of Gachibowli, Hitec City, and more, saw rentals surge between 5-10% between 2019 and 2024, as opposed to the 5% cumulative rental growth experienced by Hyderabad.
In Pune, CBD and Kharadi saw rentals inch up by 5-10%, whereas the whole of Pune only saw their rentals grow by around 5% during the past 6 years.
Mumbai and Delhi have also seen a dip in vacancy levels since 2019. While this has dropped to 20% in Delhi at present, Mumbai ranks the lowest in terms of empty office spaces at 10.7%. In both these cities, demand for office spaces has consistently outpaced supply, which explains the low vacancies. In contrast, in Hyderabad, where supply continues to trump demand, current vacancy levels have gone as high as 25%.
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While some cities like Hyderabad and Pune had already gone beyond their pre-pandemic rental levels as early as 2022, Bengaluru and Chennai had followed suit a year later in 2023.
The last to join the bandwagon were Delhi NCR and Mumbai, which finally managed to breach their pre-pandemic levels in 2024. However, both Delhi and Mumbai recorded the highest jump in average rentals at 8% each, followed by Mumbai and Chennai, which saw hikes of about 5-6% during this period.
The recovery in demand for office spaces, which kicked off in 2022, has stayed steady since. Arpit Mehrotra, Managing Director, Office Services, India, Colliers notes that going ahead, the annual increase in average quoted rentals at the end of 2024 is likely to be higher for certain cities like Delhi NCR and Pune, as compared to other markets.
"Moreover, as demand scale-up in Indian commercial real estate solidifies, notwithstanding unforeseen events, annual space take up to the tune of 60 million sq ft is likely to be the new norm in the medium-term," he added.
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Prime location takes the cake
Even within these cities, the growth of rental demand in certain micro-markets, which are located at prime locations, saw greater than the 2-8% average growth. For instance, in Delhi NCR, Gold Course Extension Road, Noida Expressway, and Cyber City saw up to a 25% rise in rentals. In Bengaluru, which saw around 2% rental growth overall, Whitefield and ORR (Outer Ring Road) commanded a rental premium, with rents here surging by as much as 5-10% between 2019 and 2024.IOMR Zone 1 in Chennai and Bandra-Kurla Complex, Goregaon, and JVLR in Mumbai saw rents surge by around 10-20% from pre-pandemic levels between 2019 and 2024. In contrast, rental rates in Chennai and Mumbai grew at around 5% and 6%, respectively.
In Hyderabad, SBD, or the Secondary Business District, which comprises of Gachibowli, Hitec City, and more, saw rentals surge between 5-10% between 2019 and 2024, as opposed to the 5% cumulative rental growth experienced by Hyderabad.
In Pune, CBD and Kharadi saw rentals inch up by 5-10%, whereas the whole of Pune only saw their rentals grow by around 5% during the past 6 years.
Mumbai and Delhi have also seen a dip in vacancy levels since 2019. While this has dropped to 20% in Delhi at present, Mumbai ranks the lowest in terms of empty office spaces at 10.7%. In both these cities, demand for office spaces has consistently outpaced supply, which explains the low vacancies. In contrast, in Hyderabad, where supply continues to trump demand, current vacancy levels have gone as high as 25%.
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Going ahead, the Colliers report also estimates that average office rentals can witness up to 10% annual growth across key Indian cities by the end of this year.