April 27, 2024: According to the latest report by real estate consultant Vestian, office absorption increased to 13.40 million square foot (msf) in Q1 2024 from 11.85 msf in Q1 2023, witnessing a 13% increase YOY. However, the absorption declined by 31% this quarter after peaking in Q4 2023. Southern cities (Bangalore, Chennai and Hyderabad) accounted for 61% of the Pan-India absorption in Q1 2024 its share increased from 54% a year earlier, the report said.
Office absorption in key cities
Further, the report highlighted that absorption more than doubled within a year in Chennai and Mumbai, whereas it increased by 51% in Hyderabad. All the other cities witnessed a decline over the same period a year earlier. Moreover, the IT-ITeS sector dominated absorption with a 47% share, followed by the BFSI sector with an 11% share. Flexible spaces garnered interest from large conglomerates post-pandemic, accounting for 8% of the pan-India absorption in Q1 2024.
Shrinivas Rao, FRICS, CEO, Vestian said, “2024 started on a positive note as major office markets of India witnessed sustained absorption activities. ‘Return to Office’ mandates are likely to renew demand for office spaces across the country and may drive the next wave of growth amid global headwinds.”
| City | Q1 2024 | Q4 2023 | Q1 2023 | Q1 2024 vs Q4 2023 | Q1 2024 vs Q1 2023 |
| Banaglore | 2.62 | 4.80 | 3.30 | -45% | -21% |
| Chennai | 3.35 | 1.30 | 1.60 | 157% | 109% |
| Hyderabad | 2.27 | 4.30 | 1.50 | -47% | 51% |
| Mumbai | 2.49 | 3.10 | 1.20 | -20% | 108% |
| Kolkata | 0.16 | 0.23 | 0.35 | -30% | -54% |
| Pune | 0.71 | 2.60 | 1.50 | -73% | -53% |
| NCR | 1.81 | 3.00 | 2.40 | -40% | -25% |
| Total | 13.40 | 19.33 | 11.85 | -31% | 13% |
Source: Vestian Research
New completions witness 26% increase in Q1 2024
The report mentioned that new completions followed the same trend and witnessed an annual increase of 26%, reaching 10.8 msf in Q1 2024. However, new completions declined by 27% over the previous quarter. While Bangalore dominated new completions with 3.7 msf, Hyderabad reported nearly 2.5 msf of supply during Q1 2024. New completions in other cities were at 0.6 msf in Chennai, 1 msf in Mumbai, 1.7 in Pune and 1.3 in NCR.
Absorption surpassing new completions led to a slight improvement in occupancy levels across the country. Currently, the vacancy level stands at 13.8%, which may improve further in the second half of 2024, owing to the growing prominence of ‘Back to Office’ mandates.
Sustained absorption activities and limited new completions in the past year guided rentals northward. As a result, rentals appreciated across the top seven cities in the range of 2.4% to 6.8% over the previous year. Pune witnessed the highest annual increase in rentals due to robust demand for office spaces with a majority of transactions, around 37%, concentrated in the manufacturing and engineering sector.
Rao added, “domestic investors are bullish about India’s growth story and may contribute significantly to the future growth of office spaces in India.”
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