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A new report from Vestian underscores the dynamic nature of India's office space market in Q3 FY25. While new construction has declined by 4% year-over-year, absorption rates have seen a remarkable 17% increase compared to the same period last year, as well as a 9% rise from the previous quarter. The thriving markets of Bengaluru, Chennai, and Hyderabad accounted for 61% of pan-India absorption, with Bengaluru solidifying its position as a leading hub. The NCR region, in particular, witnessed a surge in demand driven by flex spaces. Despite the overall growth, new completions increased by only 3%, with Mumbai and Chennai reporting significant declines. Amidst these trends, BFSI and flex spaces emerged as the dominant sectors, accounting for 39% of total absorption.
According to Vestian, the construction of new office space has decreased by 4% compared to the same period last year. In contrast, there has been a 17% year-over-year increase in absorption, as well as a 9% rise compared to the previous quarter. Advertisement
Bengaluru, Chennai, and Hyderabad collectively accounted for 61% of the overall pan-India office space absorption in Q3 FY25. Bengaluru's share rose significantly from 25% in Q2 to 36% in Q3, with an absorption of 6.63 million sq ft. Hyderabad followed closely with 2.79 million sq ft. Meanwhile, Mumbai's share decreased from 20% to 12% during the same period.
The NCR market witnessed the highest quarterly increase of 118% in terms of value, driven by a surge in office space take-up by flex spaces.
Except for Mumbai and Chennai, all other cities reported an uptick in construction activities during Q3 FY25. However, new completions increased by only 3% over the previous quarter, reaching 12.80 million sq ft.
Mumbai saw a 73% decrease in new completions, while Chennai registered a 29% decrease. Hyderabad dominated the new completions with a 32% share (4.10 million sq ft) in Q3 2024, closely followed by Bengaluru at 28%.
While average rentals remained stable in Kolkata, Bengaluru witnessed the highest appreciation of 1.1% over the previous quarter.
BFSI and Flex Spaces accounted for 39% of the pan-India absorption in Q3 FY25, an increase of 20% from the previous quarter. The total absorption rate of office space this year is 18.61 million sq ft.
Finally, pan-India vacancy has reduced by 90 bps over the previous quarter, reaching 14.8% in Q3 2024. Bengaluru and Pune have the lowest vacancies at 8.2% and 7.2%, respectively.
The insights from Vestian's analysis have revealed a shifting landscape in India's office space market. The ability to adapt to the changing dynamics will be crucial in shaping the future direction of India's office space realty landscape. Anticipating and addressing the evolving needs of businesses and workforce will be the key to unlocking sustained growth and maintaining the industry's momentum.
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