July 30, 2024: AI and robotics companies accounted for 21% of Bangalore’s office space absorption in Q2 2024, as per Vestian’s quarterly office market report The Connect Q2 2024. Rapid global advancement of artificial intelligence, combined with a supportive ecosystem, has significantly driven the demand for office space in the city. Overall, the IT-ITeS sector, including AI and robotics, accounted for 69% of the city’s absorption in Q2 2024.
Bangalore contributed the highest to pan-India absorption with 25% share in Q2 2024, followed by Hyderabad and Mumbai at 20% each. Pune reported the highest quarterly growth, around 307% in value terms, whereas absorption declined by 48% in Chennai during Q2 2024. NCR also witnessed a quarterly decline of 37% during the quarter. All the cities except Chennai and NCR reported an increase in absorption both quarter-on-quarter (QoQ) and year-on-year (YoY).
| Grade A office space absorption | |||||
| City | Q2 2024 (in msf) | Q1 2024 (in msf) | Q2 2023 (in msf) | QoQ change | YoY change |
| Bangalore | 4.25 | 2.62 | 3.70 | 62% | 15% |
| Chennai | 1.75 | 3.35 | 2.20 | -48% | -20% |
| Hyderabad | 3.40 | 2.27 | 2.30 | 50% | 48% |
| Mumbai | 3.39 | 2.49 | 1.80 | 36% | 88% |
| Kolkata | 0.23 | 0.16 | 0.10 | 44% | 130% |
| Pune | 2.88 | 0.71 | 1.80 | 307% | 60% |
| NCR | 1.14 | 1.81 | 2.00 | -37% | -43% |
| Total | 17.04 | 13.40 | 13.90 | 27% | 23% |
The IT-ITeS sector dominated absorption with a 38% share in Q2 2024, followed by BFSI and Consulting Services at 12% and 10% respectively. Flex spaces accounted for 8% of the total absorption during the quarter. H1 2024 witnessed absorption of over 30 million soiree foot (msf), registering an uptick of 18% compared to H1 2023. As the demand for grade-A office spaces is robust across the top seven cities of India, the entire year (2024) is expected to cross the 60 msf mark again after peaking in 2023.
Absorption reached 17.04 msf in Q2 2024, registering an increase of 27% QoQ and 23% YoY. The surge could be attributed to an improved global macroeconomic scenario and India’s robust growth amid global geopolitical challenges. Following a similar trend, new completions also increased by 17% YoY in H1 2024, reaching 23.2 msf. Additionally, Q2 2024 witnessed a quarterly increase of 15% and a yearly rise of 10% in new completions.
All the cities except Pune and Bangalore witnessed an uptick in construction activities during Q2 2024 compared to the previous quarter. Moreover, Mumbai reported 3.3 msf of new completions during Q2 2024, registering the highest quarterly rise of 230%. Bangalore dominated new completions with a 28% share, closely followed by Mumbai at 27%. Southern cities (Bangalore, Chennai and Hyderabad) accounted for 57% of the total new completions reported in Q2 2024, however, the share has dropped from 63% in Q1 2024.
| Grade A office space new completions | |||||
| City | Q2 2024 (in msf) | Q1 2024 (in msf) | Q2 2023 (in msf) | QoQ change | YoY change |
| Bangalore | 3.50 | 3.70 | 3.50 | -5% | NIL |
| Chennai | 0.70 | 0.60 | 2.10 | 17% | -67% |
| Hyderabad | 2.90 | 2.50 | 4.10 | 16% | -29% |
| Mumbai | 3.30 | 1.00 | 0.30 | 230% | 1,000% |
| Kolkata | 0.00 | 0.00 | 0.00 | NA | NA |
| Pune | 0.50 | 1.70 | 0.80 | -71% | -38% |
| NCR | 1.50 | 1.30 | 0.50 | 15% | 200% |
| Total | 12.40 | 10.80 | 11.30 | 15% | 10% |
Shrinivas Rao, FRICS, CEO, Vestian, said, “Despite global geopolitical challenges, India’s office markets reported robust real estate activities during Q2 2024. The quarter has already set the tone for robust leasing and construction activities for the current calendar year. Real estate activities are anticipated to increase further on the back of strengthened demand from IT-ITeS and BFSI sectors. Flex spaces are also likely to play a pivotal role in the growth of office markets in India.”
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