Office Rents Surpass Pre-Pandemic Levels; Mumbai Retains Position as Priciest Office Market

2024-10-26 03:13:23

As of the end of September, the nationwide weighted average quoted office rent stood at approximately Rs 101.30 per square foot per month, a rise of about 2% over 2019 levels. However, there are concerns in certain markets, with nearly 25% of office space in Hyderabad remaining vacant, drawing attention to possible overdevelopment.

Office rents across major Indian markets have exceeded pre-pandemic rates, according to market sources, marking a rebound not seen since 2019. Yet, there are challenges in key markets, with lower-than-expected rental growth in Bengaluru and elevated vacancy rates, particularly in Hyderabad and Delhi-NCR, which encompasses areas like Gurugram, Noida, and Faridabad.

Mumbai remains India’s most expensive office rental market, with average rents increasing nearly 6% since 2019, reaching Rs 151.60 per square foot per month by the July-September quarter. The city’s rental market remains robust due to strong demand from sectors like banking and financial services, which continue to drive the market, according to Colliers data.

Pune has also shown resilience, with a rental increase of 7.7% since 2019, thanks to a boost in global capability centers (GCCs) and strategic manufacturing operations. In Balewadi, for instance, rents have risen from Rs 60-65 per square foot pre-pandemic to around Rs 80-85 now.

Bengaluru’s rental growth has been modest, with an increase of just over 2% since 2019, reflecting a longer trend of stable rates in legacy technology parks located on the city’s outskirts. Delhi-NCR, meanwhile, has seen an 8.3% rental hike, bringing average rents to Rs 105.90 per square foot.

While overall office rents have rebounded, vacancy rates remain concerning. Mumbai shows the lowest vacancy at around 11%, while Delhi-NCR has a 20% vacancy rate, and Bengaluru's vacancy stands at 17%, according to Colliers. Hyderabad faces particularly high vacancy rates, with nearly 25% of its office space unoccupied, indicating possible oversupply as developers anticipated demand that has yet to materialize.