The Indian office market continued its strong performance in the second quarter (Q2) of 2024, registering 15.8 million square feet of office leasing across the top six cities. This marked a notable 16 per cent rise over the previous quarter, with four out of the six cities seeing more than a 20 per cent increase in office leasing, signalling robust occupier confidence and market sentiment. Bengaluru and Mumbai led the office demand, cumulatively accounting for more than half of India’s leasing activity, driven by diverse sectors such as BFSI, Technology, and Engineering & Manufacturing.
These are the findings of the Q2 Office Update by Colliers. After a prolonged phase of steady demand, Mumbai saw a significant 3.5 million square feet of leasing during this quarter, twice the levels compared to Q2 2023, mainly due to strong demand from newly completed office supply.
“Driven by consistent demand across consecutive quarters, 2024 has already seen impressive leasing activity to the tune of 29.4 million square feet of office space, marking a 19 per cent 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 million square feet for the third consecutive time in 2024,” says Arpit Mehrotra, Managing Director, Office Services, India, Colliers.
In the second quarter of 2024, the trends in Grade A gross absorption across major Indian cities highlighted a dynamic office market. Bengaluru saw a substantial year-on-year (YoY) increase of 41 per cent, with absorption rising from 3.4 million square feet in Q2 2023 to 4.8 million square feet in Q2 2024, and a 33 per cent increase for the first half of the year (H1) from 6.6 million square feet to 8.8 million square feet. Conversely, Chennai experienced a decline, with Q2 absorption dropping 39 per cent from 3.3 million square feet to 2.0 million square feet, and a 29 per cent decrease in H1 from 4.9 million square feet to 3.5 million square feet.
Delhi-NCR also saw a significant reduction, with Q2 figures falling 39 per cent from 3.1 million square feet to 1.9 million square feet and a 17 per cent drop in H1 from 5.3 million square feet to 4.4 million square feet. Hyderabad exhibited remarkable growth, with a 73 per cent YoY increase in Q2 from 1.5 million square feet to 2.6 million square feet, and a 96 per cent surge in H1 from 2.8 million square feet to 5.5 million square feet. Mumbai's performance was particularly notable, with a 119 per cent rise in Q2 from 1.6 million square feet to 3.5 million square feet and a 108 per cent increase in H1 from 2.6 million square feet to 5.4 million square feet.
Pune, however, faced a downturn with a 41 per cent decrease in Q2 from 1.7 million square feet to 1.0 million square feet, and a 31 per cent drop in H1 from 2.6 million square feet to 1.8 million square feet. Overall, Pan India recorded an 8 per cent growth in Q2, rising from 14.6 million square feet to 15.8 million square feet, and a 19 per cent increase in H1 from 24.8 million square feet to 29.4 million square feet, according to data from Colliers.
New Supply and Market Trends
During Q2 2024, new supply across the top six cities surged 6 per cent YoY, reaching 13.2 million square feet. Mumbai accounted for 30 per cent of new supply, followed by Hyderabad at 27 per cent. Significant project completions and substantial materialisation of pre-commitments have made the first six months of 2024 particularly strong for the Mumbai office market.
Flex Space Momentum
Technology and Engineering & Manufacturing remained the front runners during Q2 2024, accounting for almost half of the total demand. Flex spaces also saw healthy leasing of 2.6 million square feet, the highest in any quarter, with Bengaluru and Delhi-NCR accounting for 65 per cent of this activity.
“Overall office leasing continues to remain broad-based in the first half of 2024. Although, with 25 per cent share, the Technology sector drove office demand during H1 2024, leasing activity by occupiers from BFSI and Engineering & 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 million square feet 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,” says Vimal Nadar, Senior Director and Head of Research, Colliers India.
Despite increasing rentals compared to the previous year, vacancy levels remained under control across major markets, hovering around 17 per cent by the end of Q2 2024.
With demand outpacing supply, the Indian office market is poised for sustained growth, supported by strong developer and investor confidence.
