Office Space Transactions 43% YoY Surge In Top Eight Markets

BY Realty Plus

In their latest report, Knight Frank India revealed a significant surge in office space transactions across the top eight markets in India, reaching 16.2 million square feet (mn sq ft), marking a 43% year-on-year (YoY) growth in Q1 2024. Bengaluru spearheaded this growth, securing the top position with 3.5 mn sq ft of transactions, constituting 22% of the total office take-up during the first quarter of 2024.

Following closely, the National Capital Region (NCR) emerged as the second most active office market with 3.1 mn sq ft of transactions. Hyderabad also demonstrated consistent growth, achieving a post-pandemic high of 3 mn sq ft in Q1 2024. The office space transactions were primarily driven by India-facing businesses and Global Capability Centres (GCC), recording 5.9 mn sq ft and 5.0 mn sq ft of transactions respectively.

Flex space also maintained its momentum accounting for 23% of transactions matching its highest quarterly volumes previously recorded in Q4 2021. Additionally, the office market saw 13.0 mn sq ft of completions in Q1 2024, with rents either stabilizing or experiencing robust growth in YoY terms. Vacancy levels trended down to 15.8% in Q1 2024, reflecting a consistent lag in fresh supplies compared to transaction volumes. Notably, Chennai led the rental growth with a 9% increase year-on-year, followed by Bengaluru at 5% in Q1 2024.

The report, while tracking the residential sector, highlighted robust growth across the leading eight residential markets. In Q1 2024, home sales surged by 9% YoY to 86,345 units, second only to Q4 2023 in six years. Mumbai led with 23,743 units sold, marking a 17% YoY increase. Homes priced at INR 10 million and above constituted 40% of sales, driving growth by 51% YoY with 34,895 units sold in Q1 2024.

Units priced between INR 5-10 million saw a 6% YoY correction with 28,424 units sold, while units under INR 5 million experienced a 10% YoY decline with 23,026 units sold, continuing a nine-quarter deceleration trend. New launches were recorded at 93,254 units, surpassed sales in this quarter. Depleted older inventory drove consumers to newly launched properties at attractive prices, lowering average inventory age to 15.9 quarters in Q1 2024 from 16.7 at the end of 2023.

Experiencing a remarkable 43% YoY growth, the Indian office space market maintained its momentum into Q1 2024 following a robust performance throughout 2023. Leading the charge, Hyderabad emerged as a standout performer, witnessing a staggering 261% YoY surge in office space transactions, closely trailed by Pune with a notable 146% YoY growth.

 Office completions saw a growth of 185% YoY to 13 mn sq ft in Q1 2024, largely exaggerated because of the exceptionally low volumes seen in the base period of Q1 2024. Bengaluru with 5 mn sq ft accounted for 39% of the space coming online during the quarter, followed by Hyderabad at 3.7 mn sq ft.

India Facing business continued to anchor Indian office market and constituted 37% of office demand with transaction of 5.9 mn sq ft. Mumbai and NCR were the biggest contributors in this segment with transaction volumes of 2.4 mn sq ft and 1.5 mn sq ft respectively. Global Capability Centres (GCC) further consolidated their position making up 31% of office demand with transaction volumes of 5 mn sq ft in Q1 2024. During the first quarter of 2024, Bengaluru and Hyderabad collectively represented 75% of all transactions within the GCC space. Noteworthy is that within Bengaluru, GCCs constituted 51% of the total volume transacted, while in Hyderabad, they comprised a substantial 65%. 

Flex space operators accounted for 23% or 3.8 mn sq ft of the transactions in Q1 2024. With transactions volume of 1.15 mn sq ft and 0.92 mn sq ft, Pune and Bengaluru respectively were the biggest contributors to flex office leasing markets in the country. 

In Q1 2024, rental values continued to remain stable or grow across all markets, both YoY and sequentially. Notably, this marks the seventh consecutive quarter with either stable or positive YoY rent movement. Chennai recorded the highest rental value appreciation of 9% during Q1 2024. Office rents in the larger office markets of Bengaluru, Mumbai and NCR grew by 5%, 4% and 4% YoY respectively.  Mumbai recorded the highest office rental at INR 115.1/sq ft/month followed by NCR at 86.8/sq ft/month in Q1 2024.

Tags : Knight Frank India transactions Indian office space market National Capital Region Global Capability Centres