According to ANAROCK research, South Indian cities Bengaluru, Chennai, and Hyderabad have witnessed a substantial increase in office rentals over the past five years. Between 2019 and 2024, average office rentals in these cities surged by up to 26 per cent, positioning them as the top performers in the country’s commercial real estate market.
Bengaluru leads with a 26 per cent rise in office rentals in the period – from Rs 74 per sq. ft. per month in 2019 to Rs 93 per sq. ft. per month in 2024, followed by Hyderabad with 25 per cent growth – from Rs 56 per sq. ft. in 2019 to Rs 67 per sq. ft. in 2024 and Chennai with 20 per cent rise – from Rs 60 per sq. ft. in 2019 to Rs 75 per sq. ft.
In contrast, NCR in the North saw the lowest average monthly rental growth of 10 per cent in the period – from Rs 78 per sq. ft. per month in 2019 to Rs 86 per sq. ft. in 2024.
Western cities, including Pune, saw 19 per cent growth – from Rs 68 per sq. ft. to Rs 81 per sq. ft. in 2024, while MMR saw 13 per cent growth – from Rs 124 per sq. ft. in 2019 to Rs 140 per sq. ft. in 2024.
Despite the massive new supply addition of over 48.11 mn sq. ft. in 2024 across the top 7 cities, office vacancies dropped to 16.5 per cent in 2024 as against 17.8 per cent in 2023. However, compared to 2019 when vacancies in the top 7 cities stood the lowest at 13.50 per cent, the office vacancies continue to be higher presently. Notably, among the top 7 cities, Chennai had the least office vacancy of 9.30 per cent in 2024.
In the last six years (2019-2024), a total of nearly 283.21 mn sq. ft. of office space has been added across the top 7 cities, with 2022 recording the highest new supply addition of 57.75 mn sq. ft. Overall, the South cities added nearly 172.96 mn sq. ft. of office space comprising a whopping 61 per cent overall share. Western cities added over 60.31 mn sq. ft. space or 21 per cent share. NCR added 17 per cent share or approx. 47.39 mn sq. ft. new office supply.
In 2024, a total of 48.11 mn sq. ft. of new office supply has been added across the top 7 cities. Interestingly, of this new office supply added, the Southern cities of Hyderabad, Bengaluru and Chennai comprised a whopping 57 per cent share or approx. 27.65 mn sq. ft. This was followed by the Western cities of MMR and Pune with 30 per cent share or approx. 14.5 mn sq. ft. North’s NCR comprised just 12 per cent overall share or approx. 5.93 mn sq. ft. area.
Further, net office absorption across the top 7 cities in the six years stood at nearly 224.18 mn sq. ft. Of the net absorption in the last six years; South cities comprised 56 per cent share or approx. 125.84 mn sq. ft., followed by West with 25 per cent share or approx. 55.18 mn sq. ft.
The highest net absorption in the last six years was in 2024 – of approx. 49.95 mn sq. ft. Again, Southern cities comprised the highest 55 per cent share or approx. 27.32 mn sq. ft., followed by the West cities with 24 per cent share and NCR with 19 per cent share while Kolkata with just 2 per cent share.
Interestingly, sector-wise transaction data trends indicate the growing prominence of the co-working sector in the last six years. In 2019, this sector comprised a 15 per cent share of gross leasing across the top 7 cities. The share of co-working jumped up to over 25 per cent in 2023, but 2024 saw a slight decline to over 21 per cent share.
Further, the BFSI sector too has seen rising demand in the period with its overall share increasing from 7 per cent in 2019 to 17 per cent in 2024. In contrast, the IT/ITeS sector share in gross absorption decreased to just 28 per cent in 2024 from 42 per cent in 2019.
