October 3, 2023: Demand for office spaces in the medium to long term will remain strong in India’s top seven cities because of cost-effectiveness with monthly average rental hovering around $1-2 per square foot (sqft), according to a report released by Vestian Research. In sharp contrast, the monthly average rent in New York, London, Miami, Seattle and Boston is $40-80 per sqft. Rentals in Hong Kong, Singapore and Shanghai are $3-8 per sqft a month.
Shrinivas Rao, CEO, Vestian, said “Indian office market has grown leaps and bounds in the past decade due to robust demand from large multinational companies (MNCs). These companies set up their operations in India to reap the cost benefits. The demand for office spaces in India is expected to be buoyant amid current macroeconomic uncertainty across the globe as companies are majorly focusing on optimising operational costs for their businesses”.
Rental of all major office markets globally
| City | Average monthly office rentals (in $/sqft)) |
| New York | 60-80 |
| London | 60-70 |
| Miami | 55-65 |
| Seattle | 45-55 |
| Boston | 40-50 |
| Hong Kong | 6-8 |
| Singapore | 6-8 |
| Shanghai | 3-4 |
| Mumbai | 1-2 |
| Delhi | 0.5-1.5 |
| Bengaluru | 0.8-1.2 |
| Pune | 0.7-1.1 |
| Chennai | 0.6-0.9 |
| Hyderabad | 0.6-0.9 |
| Kolkata | 0.4-0.7 |
Vestian’s report noted that several MNCs have set up their offices in India to effectively manage and execute real-time tasks across the globe from their Indian base. This preference is chiefly driven by the substantial cost advantage associated with operating from India, as the cost of occupancy and overall operational expenses in India are notably lower in comparison to many other countries.
The availability of a high-quality talent pool at an affordable rate is also an important factor for MNCs to set up offices in India. Indian professionals have consistently demonstrated high efficiency, surpassing their counterparts in various parts of the world. An additional financial advantage lies in currency exchange rates as it reduces the operational cost significantly.
India’s major office micro-markets and their rentals
| City | Micro market | Average monthly office rentals (in $/sqft) |
| Mumbai | BKC (Bandra Kurla Complex) | 3.3 |
| CBD (Fort, Church Gate, Cuffe Parade, Colaba) | 2.7 | |
| NCR | CBD Delhi (Connaught Place, Barakhamba Road, KG Marg, Minto Road) | 3.7 |
| Gurugram 1 (MG Road, NH-8, Golf Course Road, Golf Course Extn Road) | 1.5 | |
| Noida (Sectors 16, 18, 62, 63, Noida-Greater Noida Expressway) | 0.8 | |
| Bengaluru | Outer Ring Road (Stretch from Hebbal to Silk Board Junction) | 1.3 |
| CBD (M.G. Road, Kasturba Road, Lavelle Road, V.M. Road, Ulsoor Road, Infantry Road) | 1.8 | |
| Pune | CBD (Bund Garden Road, S B Road, Camp, Deccan, Pune Station Road) | 1.6 |
| SBD East (Kalyani Nagar, Hadapasar, Kharadi, Airport Road, Viman Nagar, Yerwada, Nagar Road, Vishrantwadi) | 1.1 | |
| Kolkata | CBD (Esplanade, Park Street, Camac Street, AJC Bose Road, Dalhousie, Theatre Road, Shakespeare Sarani Road) | 1.3 |
| Chennai | CBD (Anna Salai, Cathedral Road, Dr. R.K. Salai, Nungambakkam) | 1.0 |
| SBD South (Porur, Guindy, Mt. Poonamallee Road) | 1.1 | |
| Hyderabad | PBD West (Madhapur, Gachibowli, Raidurgam, Manikonda, Hitec City) | 1.0 |
| SBD (Banjara Hills, Jubilee Hills) | 0.8 |
India’s gross office leasing
| Office space absorption in million square foot (msf) | ||||||
| City | Q2 2023 | Q2 2022 | Q2 2023 vs Q2 2022 | H1 2023 | H1 2022 | H1 2023 vs H1 2022 |
| (% Change) | (% Change) | |||||
| Bengaluru | 3.7 | 4.2 | -12% | 7.0 | 7.7 | -9% |
| Chennai | 2.2 | 1.2 | 83% | 3.8 | 2.7 | 41% |
| Hyderabad | 2.3 | 2.4 | -4% | 3.8 | 4.4 | -14% |
| Mumbai | 1.8 | 2.4 | -25% | 3.0 | 3.6 | -17% |
| Kolkata | 0.1 | 0.8 | -88% | 0.5 | 1.0 | -55% |
| Pune | 1.8 | 1.7 | 6% | 3.3 | 3.4 | -3% |
| NCR | 2.0 | 2.1 | -5% | 4.4 | 4.3 | 2% |
| Total | 13.9 | 14.8 | -6% | 25.8 | 27.1 | -5% |
Here is a list of the major reasons for cost differences between the average rental rates in Indian markets and those of other countries:
- Demand disparity in global financial markets and Indian cities: The demand for office spaces in prominent global financial hubs such as New York, London, Boston, Brisbane, Melbourne, Hong Kong and Singapore remain exceptionally high, resulting in fiercely competitive rental rates. In stark contrast, Indian cities exhibit an abundance of office space, leading to a more competitive pricing landscape.
- Influence of currency exchange rates: Currency exchange rates exert a significant influence on the relatively lower office space rentals in India. This dynamic is integral to understanding the cost differential between Indian markets and their global counterparts.
- Competitive advantage in labour costs: India enjoys a distinct competitive advantage due to its comparatively low labour costs when juxtaposed with many other countries. This affordability extends to various facets of business operations, including the acquisition of office spaces.
- Government initiatives to foster business growth: The Indian government has proactively introduced a range of initiatives aimed at attracting foreign investment and spurring business growth. These measures include incentives and tax benefits, which collectively serve to reduce the overall cost of conducting business, including expenditures related to office space.