India’s Grade A Office Space Demand Projected to Cross 70 Million Square Feet in 2024: CREDAI – CRE Matrix Report

According to a report issued by CREDAI in collaboration with CRE Matrix, Grade A office space leasing demand in India will cross 70 Million Square Feet (MSF) this year. The report highlighted how India has already experienced a notable surge in Grade A office demand during the first quarter of CY 2024 at 16.7 MSF, with a 12% increase QoQ and a 14% rise YoY. Bengaluru, MMR (Mumbai Metropolitan Region), and Delhi-NCR (National Capital Region) were the primary drivers of this growth in demand, accounting for nearly two-thirds of the total office demand. These top three cities collectively witnessed a 23% growth from the previous quarter.

Nationwide, market rentalsacross Grade A spaces continued to increase, nearing the ₹100 per square feet milestone, with an 8.7% QoQ increase in Q1 CY 2024. The disparity between market and existing rental rates expanded to approximately 14%, signalling a robust landlord-centric market environment. Specifically, Bengaluru, Pune, and Hyderabad experienced an uptick in rental rates during Q1 CY’24 compared to the preceding quarter.

Additionally, the report also highlighted the quantum oflarger deals (> 1 lac sq feet) driving office demand. In the first quarter of CY 2024, 56% of the demand stemmed from occupiers leasing more than 1 Lakh square feet, marking a significant increase from 36% in the fourth quarter of CY 2023 and 33% in the first quarter of CY 2023. Bengaluru, Hyderabad, and Noida together accounted for 66% of these deals exceeding 1 Lakh square feet.

In the resurgence of returning to office spaces, the IT/ITeS sector emerged as the dominant force in leasing demand, accounting for approximately 28% of office space requirements. Meanwhile, the BFSI sector saw an increase in its share of leasing demand, rising from 16% in the first quarter of CY 2023 and 13% in the fourth quarter of the same year to 20% in the first quarter of CY 2024. Mumbai and Chennai alone contributed to 50% of the BFSI sector's demand. In terms of the IT/ITeS sector, although Bengaluru remained a major contributor with 35% of the sector's demand, Noida surpassed Hyderabad, accounting for 20% of the demand in the first quarter of CY 2024. We are also witnessing co-working spaces making a mark for themselves as an emerging asset class by contributing 10% to Grade A office space demand.

CREDAI President Boman Irani, says“With a confluence of robust economic fundamentals and substantial investments fuelling both physical and digital infrastructure, we project pan India Grade A office demand to continue its momentum and reach the 70 million square feet in 2024.Grade A spaces have witnessed a sharp increase in demand in the past 4-5 years driven primarily by GCCs and the IT sector, that have a played a huge role in transforming India’s office space landscape. This forecast underscores not only the resilience of commercial real estate sector but also the immense opportunities awaiting developers, corporates and investors.”

Abhishek Kiran Gupta, CEO & Co-founder, CRE Matrix & IndexTapshared his remarks, As rentals increase in prime markets of NCR, Bengaluru and Mumbai, we are likely to see larger deals happening in cities such as Pune, Chennai, Hyderabad and Noida where occupiers would be willing to pay for high grade spaces. Upcoming quarters are likely to see growth in office supply completions and with market rentals tilted towards landlord in key markets, leasing business volumes are likely to grow as well. The new Government’s Budget is also expected to provide a boost to infrastructure and BFSI sectors which in-turn are likely to keep rentals in upward trajectory.