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The Indian office market is undergoing a significant shift, with domestic companies projected to lease 60-65 million square feet of office space between 2024 and 2025. This marks a departure from the historical dominance of global corporations, as domestic firms have seen a 60% increase in office space absorption over the last two years. Domestic technology, BFSI, and flexible space sectors are the key drivers of this growth, with cities like Bengaluru, Hyderabad, and Mumbai emerging as prominent hubs. Factors such as the Make in India program, PLI scheme, and a thriving start-up ecosystem are fuelling this expansion, which is expected to continue transforming the commercial real estate landscape in India.
The Indian office market is undergoing a notable shift, with domestic companies projected to lease 60-65 million square feet of office space between 2024 and 2025. This marks a significant departure from the historical dominance of global corporations, particularly those from the United States, according to a report by CBRE, a property consulting firm. Advertisement
Domestic firms have seen a substantial 60% increase in office space absorption over the last two years compared to the pre-pandemic years of 2018-2019. These firms have accounted for nearly 47% of overall office leasing activity in the last decade, with Delhi-NCR leading the way, followed by Bengaluru and Mumbai.
The report highlights that cities like Bengaluru and Hyderabad have seen increased occupancy by e-commerce and life sciences firms, respectively, reflecting their strong growth trajectories. Additionally, Mumbai has emerged prominently with a 43% share of domestic BFSI leasing, bolstered by substantial contributions from Delhi-NCR and Chennai during 2018 - H1 2024.
Domestic technology firms have been expanding their office footprints to meet the rising demand for tech-driven solutions. Anshuman Magazine, Chairman & CEO of CBRE's India, Southeast Asia, Middle East & Africa operations, says that India's top nine cities are poised to see an addition of 185 million sq. ft. of premium office space by 2026. He attributes this growth to India's rapidly expanding start-up ecosystem and abundant talent.
The growth in India's office market is supported by various factors, including the Make in India program, the Production Linked Incentive (PLI) Scheme, increased profitability, and a well-capitalized banking sector. Additionally, a talent pool of approximately 2.5 million STEM graduates and a thriving start-up ecosystem featuring over 100 unicorns and more than 100,000 start-ups are further fuelling the growth.
Some of the firms that have expanded recently include L&T Technology Services, leasing 545,000 sq ft in Bengaluru; LTI Mindtree, leasing 1.2 million sq ft in Bengaluru and Chennai; Smartworks, leasing 700,000 sq ft in Bengaluru; and IDFC, leasing 500,000 sq ft in Mumbai.
The demand for office space is expected to remain robust, driven primarily by the BFSI, technology, and flexible space sectors. The RCA (research, consulting, and analytics) sector, encompassing services such as legal, taxation, HR, and media, is also driving domestic leasing. Meanwhile, Indian engineering and manufacturing firms, which currently represent 7-8% of domestic office leasing, are anticipated to expand their footprint, including into Tier-II and Tier-III cities emerging as new manufacturing hubs. Similarly, homegrown retail and FMCG companies, currently accounting for 1-2% of domestic office leasing, are expected to increase their office space requirements as they expand operations and scale their workforce to support long-term growth strategies.
Experts anticipate that growth in domestic industry expansion and advances in technology, especially artificial intelligence (AI), will further transform the office sector. Digitalization, evolving workplace strategies, and enhanced business confidence are also expected to boost leasing activity.
The Indian office market has witnessed robust absorption, with office leasing across nine major cities in India reaching 32.8 million sq ft during the period from January to June 2024, marking a 14% year-on-year increase and the second-highest H1 leasing on record.
The robust growth in India's office market, driven by the rise of domestic firms, showcases the country's economic resilience and entrepreneurial spirit. As the demand for office space remains strong, supported by advancements in technology and evolving workplace strategies, the future of the Indian commercial real estate sector looks promising. With the continued expansion of domestic industries and the expansion into Tier-II and Tier-III cities, the office sector is poised to play a pivotal role in India's economic development and the country's emergence as a global business hub.
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