July 4th, 2024: According to a report by real estate consulting firm CBRE South Asia, office space leasing in Mumbai reached 3.8 million square foot (msf) in Jan-Jun’24, up from 2.3 msf during the same period in 2023, marking a 64.1% increase. The report titled ‘CBRE India Office Figures Q2 2024’ stated that the supply stood at 2.9 msf in Jan-Jun’24.
On a quarterly basis, office leasing in Apr-Jun’24 stood at 2.2 msf and supply stood at 2.9 msf in Apr-Jun’24. Key sectors that drove absorption included flexible space operators (20%), technology (15%), infrastructure, real estate and logistics (15%).
The report highlighted that Mumbai office space take-up was driven by small-sized (less than 10,000 sqft) deals during Apr- Jun’24. On a quarterly basis, absorption shares were 39% for IT, 57% for non-IT, and 4% for SEZ.
Office leasing touches 32.8 msf during Jan-Jun’24
On a Pan-India basis, overall office leasing remained strong with gross office leasing at 32.8 msf during Jan-Jun’24, recording an increase of 14% year-on-year across nine cities, the second-highest H1 leasing. The nine cities include Bangalore, Mumbai, Delhi-NCR, Hyderabad, Chennai, Pune, Kochi, Kolkata and Ahmedabad. According to the report, the total supply of 22.1 msf was recorded during the Jan-Jun’24 period.
Bangalore leads office space absorption
Bangalore led office space absorption, accounting for about one-fourth of the total leasing during Jan-Jun’24 period, followed by Delhi-NCR at 16%, Chennai at 14%, Pune and Hyderabad each contributing 13%. Bangalore, Hyderabad and Mumbai led supply additions, collectively accounting for 69% of the total in the same period.
Technology companies see the highest office leasing
According to the report, technology companies witnessed the highest share and accounted for 28% of the total office leasing, followed by flexible space operators at 16%, BFSI firms at 15%, engineering and manufacturing (E&M) at 9% and research, consulting & analytics firms (RCA) at 8% during Jan-Jun ‘24.
Additionally, domestic firms led absorption, comprising 43% of the market during Jan-Jun ‘24. Flexible space operators, technology firms and BFSI corporates predominantly drove domestic leasing activity in the first half of 2024.
On a quarterly basis, office leasing in Apr-Jun’24 stood at 18.0 msf, a 27% increase compared to Apr-Jun ’23. Bangalore, followed by Pune and Chennai led the absorption in Apr-Jun ‘24, together accounting for about 57% of the leasing activity.
Development completions of about 13.2 msf was witnessed in Apr-June ‘24, up by 49% Q-o-Q, and 11% Y-o-Y. Bangalore, Mumbai and Hyderabad drove supply addition during the quarter with a cumulative share of about 69%. The non-SEZ segment dominated development completions with a share of 90% in Q2 2024. Developers continued to exhibit their efforts towards sustainability, with over three-fourths of the newly completed space during Q2 2024 being green-certified (LEED or IGBC-rated).
Technology companies held a share of 29% in leasing activity in Apr-June ‘24, up from 26% witnessed in Jan-Mar ‘24. This was followed by banking, financial services and insurance (BFSI) firms at 17% and research, consulting & analytics (RCA) companies and flexible space operators at 12% each. Life sciences firms accounted for a 9% share in leasing. During the Apr-Jun ’24 period, American firms led the absorption, accounting for a share of around 39%.
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “Amidst a dynamic landscape, the first half of 2024 witnessed a surge in office space absorption driven by flexible workspace operators, tech, infrastructure, logistics and real estate firms. Towards the later part of 2024, the demand for quality office spaces is poised to remain strong as portfolios expand and utilization rates rise.
India’s appeal, supported by a skilled workforce and stable governance, continues to drive transformative shifts in the office sector, marked by diversified tenant demand and economic resilience. Technology sector is likely to continue to lead leasing, alongside anticipated growth in BFSI and Engineering & Manufacturing sectors. Major cities like Bengaluru, Hyderabad, Delhi-NCR, and Mumbai will uphold their pivotal roles, while cities like Chennai and Pune are positioned for heightened office space absorption. As confidence builds and infrastructure advances, Tier-II cities such as Ahmedabad, Coimbatore, Indore, and Nagpur may witness strategic expansions, underscoring India’s dynamic office market evolution.”
Ram Chandnani, managing director, Advisory & Transactions Services, CBRE India, said, “India’s robust workforce, competitive costs, and established ecosystem ensure its prominence as a key market for GCCs. With a projected 20% growth in GCC presence by 2025, the Indian office market is poised for significant expansion. 67% of GCCs plan to increase their office portfolios by over 10% in the next two years. Established players are eying large-scale city campuses, while newcomers are favouring flexible space operators for scalability. Going forward, global firms in BFSI, technology, and Engineering & Manufacturing sectors are set to expand their Indian operations, potentially establishing multifunctional centres.”
Robust leasing activity anticipated in H2 2024
The report mentioned that the office sector is expected to witness continued demand for quality office space in H2 2024 as occupiers continue to expand and solidify their presence. Further, it projected that the second half of the year will see a steady supply of high-quality office spaces, with Bangalore, Hyderabad and Delhi-NCR leading in project completions.
With average office utilisation rates witnessing an upward trajectory, occupiers are re-evaluating their leasing and portfolio strategies to accommodate their growth plans. Companies are planning to expand their office footprint potentially through a mix of traditional and flexible spaces to accommodate workforce growth and improve service deliveries in new markets.
The report said that the technology sector continues to be a major driver of leasing activity, but there is an expected shift towards a more diversified demand base in 2024. BFSI firms, flexible space operators, and engineering & manufacturing (E&M) companies are anticipated to show substantial growth in leasing.
Cities such as Bengaluru, Hyderabad, Delhi-NCR, and Mumbai remain key gateway markets for the office sector. Smaller office markets such as Chennai and Pune are projected to experience growth in office space absorption in the current year. Improved infrastructure, skilled workforce availability, and competitive rentals in Tier-II cities like Ahmedabad, Coimbatore, Indore, and Nagpur may attract strategic expansions by companies.
Rising enterprise demand drives growth in flexible workspaces
The report stated that occupiers are integrating flexible office space into their portfolio as part of their ‘Core + Flex’ strategies. Workplaces are transforming into collaborative hubs, driving the anticipated growth of flexible space stock to 80 msf by the end of 2024. Growth in flexible office space is expected to be fuelled by an emphasis on sustainability, quality, customization, and enterprise solutions, contributing to continued operator expansion, it said.
GCCs remain key driver of office demand
According to the report by CBRE South Asia, India is set to maintain its appeal for GCCs, driven by a large engineering workforce, competitive costs and a well-established ecosystem. An anticipated 20% increase in GCCs by 2025 signals substantial growth potential for the Indian office market.
About 67% of GCCs plan to expand their office portfolios by more than 10% over the next two years. Established players are exploring large-scale campuses in major cities, while new entrants are leaning towards flexible workspace solutions for scalability. Global firms in BFSI, technology, and E&M sectors are expected to expand their GCC services in India, potentially establishing multifunctional centres to support their operations.
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