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In 2024, India's office rental market rebounded, with average rents exceeding pre-pandemic levels. Core micro markets are witnessing remarkable growth, with increases of up to 25%. Following a sharp V-shaped recovery after the pandemic slowdown, leasing activity returned to pre-pandemic rates by 2022. Major cities like Hyderabad and Pune achieved rental recovery by 2022, while Mumbai and Delhi NCR completed their cycles in 2024. High demand for Grade A office spaces in well-connected locations continues to drive rental growth, resulting in a cumulative demand of 264 million sq ft since 2019.
In 2024, office rental demand in India has surpassed pre-pandemic levels, with average rents seeing significant recovery across the country's major cities. According to Colliers, core micro markets have experienced substantial growth, with increases of up to 25% compared to pre-pandemic rates. Since 2019, demand and supply have largely balanced, keeping vacancy rates stable. Advertisement
Following the pandemic-induced slowdown in 2020 and 2021, the office market rebounded quickly, showing a sharp V-shaped recovery. Leasing activity returned to pre-pandemic levels by 2022, with record-high uptake of Grade A office space in India in subsequent years. As demand remained strong, rental rates caught up, forming a slower but steady U-shaped recovery trajectory, finally exceeding 2019 levels by 2024.
Cities like Hyderabad and Pune reached pre-pandemic rental figures by 2022, while Bengaluru and Chennai followed in 2023. By 2024, Mumbai and Delhi NCR completed their recovery cycles, with Delhi NCR showing the highest growth in rental rates. Both Delhi NCR and Pune saw an 8% rise in average rentals from 2019 to 2024, followed by Mumbai and Chennai with 5-6% increases.
Core micro markets have been at the forefront of this growth, driven by high demand from occupiers. In Delhi NCR, areas such as Golf Course Extension Road, Noida Expressway, and Cyber City have seen rental increases of up to 25%. Bengaluru's Outer Ring Road and Whitefield also experienced notable rental hikes, ranging between 5-10%. Similarly, micro markets in Chennai (OMR Zone 1) and Mumbai (Goregaon/JVLR and BKC) saw rental growth between 10-20%, outpacing city-wide averages of 5-6%. These prime areas benefit from excellent connectivity and proximity to residential neighborhoods, making them highly attractive for Grade A office tenants.
Overall, the six major office markets in India have registered a cumulative Grade A office space demand of 264 million sq ft since 2019. Despite the disruptions caused by the pandemic, the market's growth momentum has been maintained. While supply infusion has matched demand in most regions, resulting in a 1.1 demand-supply ratio during 2019-2024, city-specific trends show some variation. Mumbai, for instance, has seen a sharp drop in vacancy levels, with a demand-supply ratio of 2.1, while Delhi NCR has also experienced a reduction in vacancies, falling from 25% to 20%. In contrast, Hyderabad's high supply has kept its vacancy rate around 25%.
This sustained demand, especially for Grade A developments in well-connected locations, continues to shape rental growth trends in India's office market.
In conclusion, the revival of the Indian office rental market demonstrates resilience and adaptability in the face of unprecedented challenges. With significant demand for Grade A spaces, particularly in key micro markets, the market is positioned for sustained growth. As cities like Delhi NCR and Mumbai showcase impressive rental increases, the trend of prioritising connectivity and quality office space is likely to continue. This dynamic landscape not only reflects a recovery but also sets the stage for future developments in the commercial real estate sector, promising further opportunities for investors and occupiers alike.
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