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The Indian office real estate market has witnessed remarkable growth, with 2024 recording the highest net absorption across the top seven cities since 2019, as per ANAROCK Research. Southern cities, particularly Bengaluru, Hyderabad, and Chennai, have dominated commercial leasing activity, accounting for the majority share in new supply additions and net absorption. Bengaluru led with a 26% increase in office rentals, followed closely by Hyderabad (25%) and Chennai (20%). Meanwhile, despite the addition of 48.11 million sq. ft. of new office space in 2024, office vacancies declined to 16.5%. The co-working sector has gained prominence, rising from a 15% share in 2019 to 21% in 2024, while BFSI sector demand has increased significantly. In contrast, the IT/ITeS sector's share has declined over the period.
The Indian office real estate market has experienced a significant surge in demand, with 2024 recording the highest net absorption across the top seven cities since 2019. According to ANAROCK Research, southern cities, including Bengaluru, Hyderabad, and Chennai, have surpassed other regions in office market activity, demonstrating the highest net absorption and new supply additions over the past six years. Advertisement
In terms of office rentals, Bengaluru saw a 26% increase between 2019 and 2024, with rates rising from INR 74 per sq. ft. per month to INR 93 per sq. ft. Hyderabad followed closely, experiencing a 25% increase from INR 56 per sq. ft. to INR 67 per sq. ft., while Chennai recorded a 20% rise from INR 60 per sq. ft. to INR 75 per sq. ft. In contrast, the National Capital Region (NCR) witnessed the lowest rental growth of 10%, with rates increasing from INR 78 per sq. ft. to INR 86 per sq. ft. during the same period. Western cities such as Pune recorded a 19% increase, while Mumbai Metropolitan Region (MMR) saw a 13% rise.
Despite the addition of 48.11 million sq. ft. of new office space in 2024, office vacancies declined from 17.8% in 2023 to 16.5% in 2024. However, vacancy rates remain higher compared to 2019, when they stood at 13.5%. Among major cities, Chennai reported the lowest office vacancy rate at 9.3% in 2024.
Peush Jain, MD-Commercial Leasing and Advisory at ANAROCK Group, stated that Bengaluru, Hyderabad, and Chennai had absorbed the highest share of office space, attributing the trend to a strong IT infrastructure and an abundant skilled workforce. He highlighted that most major markets are likely to experience sustained demand for office space over the next six to eight quarters, driven primarily by the technology sector and flexible workspaces. He also noted that as India continues to grow as a global economic powerhouse, multinational corporations will expand their Global Capability Centres (GCCs), further fuelling demand, alongside an expanding start-up ecosystem and the BFSI sector.
Over the six-year period from 2019 to 2024, nearly 283.21 million sq. ft. of office space was added across the top seven cities, with the highest new supply addition recorded in 2022 at 57.75 million sq. ft. Southern cities contributed 61% of the total new supply, while western cities accounted for 21% and NCR for 17%. In 2024 alone, the South accounted for 57% of the new supply, followed by the West at 30% and the North at 12%.
Net office absorption over the same period stood at approximately 224.18 million sq. ft., with the South contributing 56%, the West 25%, and NCR 19%. The highest net absorption was recorded in 2024 at around 49.95 million sq. ft., with the South maintaining its lead.
Sector-wise, co-working spaces saw significant growth, increasing their share from 15% in 2019 to a peak of 25% in 2023 before settling at 21% in 2024. The BFSI sector also expanded, with its share rising from 7% in 2019 to 17% in 2024. However, the IT/ITeS sector's dominance weakened, with its share declining from 42% in 2019 to 28% in 2024.
The Indian office real estate market has exhibited strong resilience and growth over the past six years, with southern cities leading in rental appreciation, net absorption, and new supply additions. While the overall market has shown steady progress, regional disparities persist, with NCR and western cities witnessing relatively moderate growth compared to their southern counterparts. The rise of co-working spaces and the BFSI sector highlights a shift in leasing trends, while the declining share of the IT/ITeS sector suggests evolving market dynamics. Going forward, as global corporations expand operations and the start-up ecosystem flourishes, sustained demand for office spaces is expected to continue in key markets.
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