According to CBRE South Asia Pvt. Ltd reporttotal office leasing by Global Capability Centres (GCCs) in the first half of 2024 accounted for ~37% of the overall office leasing in India.BFSI firms and technology companies contributed to about 45% of the total leasing by GCCs during the same period. GCCs leased 11.9 mn. sq. ft. office space in Jan-Jun’24 period.
Bengaluru had the highest share of GCC leasing, at 39%, followed by Pune at 20%, while Hyderabad and Chennai at 17% and 11%, respectively, during Jan-Jun ’24.
On a pan-India basis, overall office leasing remained strong, with gross office leasing touching 32.8 mn. sq. ft. during Jan-Jun’24, recording an increase of 14% year-on-year across nine cities, the second-highest H1 leasing. The nine cities include Bengaluru, Mumbai, Delhi-NCR, Hyderabad, Chennai, Pune, Kochi, Kolkata, and Ahmedabad. According to the report, total supply of 22.1 mn. sq. ft. was recorded during Jan-Jun’24 period.
Bengaluru led office space absorption, accounting for about one-fourth of the total leasing during Jan-Jun’24 period, followed by Delhi-NCR at 16%, Chennai at 14%, Pune and Hyderabad each contributing 13%. Bengaluru, Hyderabad, and Mumbai led supply additions, collectively accounting for 69% of the total in the same period.
The report indicates technology companies saw the highest share and accounted for 28% of the total office leasing, followed by flexible space operators at 16%, BFSI firms at 15%, engineering and manufacturing (E&M) at 9% and research, consulting & analytics firms (RCA) at 8% during Jan-Jun ‘24.
Additionally, domestic firms led absorption, comprising 43% of the market during Jan-Jun ‘24. Flexible space operators, technology firms, and BFSI corporates predominantly drove domestic leasing activity in the first half of 2024.
On a quarterly basis, office leasing in Apr-Jun’24 stood at 18.0 mn. sq. ft., a 27% increase compared to Apr-Jun ’23. Bengaluru, followed by Pune and Chennai led the absorption in Apr-Jun ‘24, together accounting for about 57% of the leasing activity.
Development completions of about 13.2 mn. sq. ft. was witnessed in Apr-June ‘24, up by 49% Q-o-Q, and 11% Y-o-Y. Bengaluru, Mumbai and Hyderabad drove supply addition during the quarter with a cumulative share of about 69%. The non-SEZ segment dominated development completions with a share of 90% in Q2 2024. Developers continued to exhibit their efforts towards sustainability, with over three-fourths of the newly completed space during Q2 2024 being green-certified (LEED or IGBC-rated).
Technology companies held a share of 29% in leasing activity in Apr-June ‘24, up from 26% witnessed in Jan-Mar ‘24. This was followed by banking, financial services, and insurance (BFSI) firms at 17%, and research, consulting & analytics (RCA) companies and flexible space operators at 12% each. Life sciences firms accounted for a 9% share in leasing. During Apr-Jun ’24 period, American firms led the absorption, accounting for a share of ~39%.
The office sector is expected to witness continued demand for quality office space in H2 2024 as occupiers continue to expand and solidify their presence.With average office utilisation rates witnessing an upward trajectory, occupiers are re-evaluating their leasing and portfolio strategies to accommodate their growth plans.
Companies are planning to expand their office footprint potentially through a mix of traditional and flexible spaces to accommodate workforce growth and improve service deliveries in new markets.India remains highly attractive for occupiers due to advantages like a skilled workforce and a mature corporate environment.
The continuity of the present government for a third consecutive term enhances market stability and fosters a positive outlook. India’s office sector is undergoing significant transformation driven by factors such as diversified tenant demand and robust economic growth.The technology sector continues to be a major driver of leasing activity, but there is an expected shift towards a more diversified demand base in 2024. BFSI firms, flexible space operators, and engineering & manufacturing (E&M) companies are anticipated to show substantial growth in leasing.
Cities like Bengaluru, Hyderabad, Delhi-NCR, and Mumbai remain key gateway markets for the office sector. Smaller office markets such as Chennai and Pune are projected to experience growth in office space absorption in the current year.
Improved infrastructure, skilled workforce availability, and competitive rentals in Tier-II cities like Ahmedabad, Coimbatore, Indore, and Nagpur may attract strategic expansions by companies.
Occupiers are integrating flexible office space into their portfolio as part of their ‘Core + Flex’ strategies. Workplaces are transforming into collaborative hubs, driving the anticipated growth of flexible space stock to 80 million sq. ft. by the end of 2024.
Growth in flexible office space is expected to be fueled by emphasis on sustainability, quality, customization, and enterprise solutions, contributing to continued operator expansion.India is set to maintain its appeal for GCCs, driven by a large engineering workforce, competitive costs, and a well-established ecosystem.
Anticipated 20% increase in GCCs by 2025 signals substantial growth potential for the Indian office market. About 67% of GCCs plan to expand their office portfolios by more than 10% over the next two years. Established players are exploring large-scale campuses in major cities, while new entrants are leaning towards flexible workspace solutions for scalability.
Global firms in BFSI, technology, and E&M sectors are expected to expand their GCC services in India, potentially establishing multifunctional centres to support their operations.Occupiers are focussing on uplifting the workplace experience through a range of initiatives. Incorporating employee wellness into workplace strategies emerged as a key focus area in redesigning employee experience.To drive enhanced experience, occupiers are also consulting key stakeholders to rethink the purpose and design of the workplace.
The second half of the year is expected to see a steady supply of high-quality office spaces, with Bengaluru, Hyderabad, and Delhi-NCR leading in project completions. Occupiers are prioritizing employee experience, driving a trend towards 'flight-to-quality' relocations and upgrades.
Developers are increasingly focusing on constructing state-of-the-art, green-certified office facilities with amenities that cater to modern business needs. Occupiers expect landlords to implement improvements at building and campus levels, including ESG measures like EV charging infrastructure, health and safety certifications, and energy-efficient HVAC systems.
Newly completed developments are emphasizing convenient access to public transportation, ample outdoor green spaces, optimal air quality, and diverse food and beverage options.
The introduction of quality supply amidst limited availability is likely to drive rental growth in select micro-markets across the country.