Office Net Absorption Rises 18% to Nearly 50 Million Sq Ft in 2024; Vacancy Rates Decline Amid Tech Sector Recovery

2025-01-04 02:57:27

India’s Office Market Records 18% Growth in 2024 with Net Absorption at Nearly 50 Million Sq Ft

Driven by leasing activity from companies establishing large-scale global capability centers (GCCs) in cities such as Bengaluru, Delhi NCR, Pune, and Hyderabad, the tech sector partially rebounded in 2024. Simultaneously, demand from managed and flexible space operators surged significantly.

India’s office market achieved a record net leasing absorption of 49.56 million square feet (msf) in 2024, an 18% growth compared to 2023, according to data from real estate consultancy JLL India. This uptick was fueled by the tech sector recovering from a post-pandemic slowdown and a rise in GCC setups across key markets.

Managed and flexible space operators emerged as significant contributors to office leasing activity during the year.

Bengaluru Leads the Market
Bengaluru remained the largest office market in India, recording nearly 15 msf in net absorption, a year-on-year growth of over 60%. Following Bengaluru were Delhi NCR and Mumbai, while only Chennai and Kolkata saw a decline in net absorption in 2024.

Gross leasing activity across the top seven cities, including new deals and pre-commitments, reached an all-time high of 77.22 msf. Although vacancies declined by 60 basis points sequentially, ending 2024 at 16.3%, they remained relatively high. Nevertheless, this marks a three-year low for vacancy rates. With the exception of Pune, all major markets saw a drop in vacancies.

Hyderabad’s Challenges
Concerns persist regarding elevated vacancy rates in Hyderabad, which exceed 20%. Experts attribute this to overbuilding Grade-A office spaces, driven by unlimited floor space index and large-scale projects by companies like Google. The result has been stagnant rentals and increased vacancies.

The GCC Momentum
After two years of conservative spending due to economic challenges in North America and Europe, global companies have returned to India with fresh investments and strategic operations, including GCC setups.

“Global companies were instrumental, accounting for 58.6% of leasing activity, with GCCs capturing 35.9% of the market and leasing approximately 28 msf,” said Samantak Das, Chief Economist and Head of Research and REIS, India, JLL. He noted that India’s growing focus on AI, emerging technologies, and engineering R&D is likely to drive sustained demand, solidifying its position as a global hub for innovation and workforce expansion.

Flex Space Operators Shine
Managed and flexible space operators leased around 15 msf of office space, playing a pivotal role in the market. Industry experts pointed out that several flex space operators are either listed or preparing for public listings, leading to portfolio expansions across major cities, particularly Bengaluru, Delhi NCR, and Pune.