Office leasing of 15.8 msf recorded in top 6 cities in Q2 2024: Report

June 16, 2024: Office market continued its strong performance in Q2 2024, registering 15.8 million square foot (msf) of office leasing across the top six cities, marking a notable 16% rise over previous quarter. Four out of six cities saw more than 20% increase in office leasing in the second quarter on a sequential basis, signalling robust occupier confidence and market sentiment. Bangalore and Mumbai led the office demand in Q2 2024, cumulatively accounting for more than half of India’s leasing activity. Office space demand in these two cities were driven by occupiers from diverse sectors such as BFSI, technology and engineering and manufacturing.

See also: Over 46% of office leasing is by offshoring industry: Report

After a prolonged phase of steady demand, Mumbai has seen a significant 3.5 msf of leasing during this quarter, twice the levels as compared to Q2 2023. This is mainly attributable to strong demand from newly completed office supply during the quarter.

Arpit Mehrotra, managing director, office services, India, Colliers, said, “Driven by consistent demand across consecutive quarters, 2024 has already seen impressive leasing activity to the tune of 29.4 msf of office space, marking a 19% increase compared to the same period last year. The demand for quality office spaces continues to surge, reflecting the confidence of occupiers and investors alike. Anticipated easing of global financial headwinds and continued resilience in the domestic economy augurs well for sustained growth in India’s office market. A strong H1 performance has set the tone for office space demand to comfortably surpass 50 msf for the third consecutive time in 2024.”

During Q2 2024, new supply across the top 6 cities surged 6% YoY, at 13.2 msf. Mumbai accounted for 30% share in new supply, followed by Hyderabad at 27% share. Interestingly, on account of few prominent projects receiving completion certificates in Mumbai, new supply in Q2 2024 stood at 4.0 msf, the highest incremental quarterly supply in the past 3-4 years. Overall, with significant project completions and substantial materialisation of pre-commitments, the first six months of 2024 have been particularly strong for the Mumbai office market.

Technology and engineering and manufacturing remained the front runners during Q2 2024, accounting for almost half of the total demand during the quarter. Flex spaces also saw healthy leasing of 2.6 msf across the top six cities, highest in any quarter. Bangalore and Delhi-NCR accounted for 65% of the flex space leasing activity, indicating rising demand for such spaces in these markets.

Vimal Nadar, senior director and head of research, Colliers India, said, “Overall office leasing continues to remain broad based in the first half of 2024. Although, with 25% share, the technology sector drove office demand during H1 2024, leasing activity by occupiers from BFSI and engineering and manufacturing sectors witnessed healthy traction. Flex space activity across the major cities continues to grow from strength to strength. Flex operators have already leased about 4.4 msf of office space in H1 2024, underscoring the occupiers’ continued preference for flex spaces. This also reflects the evolving needs for agility and adaptability in the modern business environment”.

Overall, with demand outpacing supply, vacancy levels remained under check across the major markets, hovering around 17% by the end of Q2 2024. While rentals have increased as compared to the previous year, they have largely remained stable on a sequential basis.