India's Office Leasing Market Sees Record-Breaking Gross Absorption

India”s office leasing market saw a record-breaking 58.2 million square feet of gross absorption in the fourth quarter of 2023, fueled by Bengaluru with over one-fourth share, peninsular India and Delhi NCR as key demand drivers, and Chennai with over 2x growth and a record 10.5 million sq ft uptake, prompting the city to be included in the top 3 for the first time, according to a report by Colliers India.

“Indian commercial real estate and office markets will continue to witness steady interest from domestic as well as foreign-origin occupiers. Increased preference for a combination of core and flex real estate space, heightened activity in Tier II markets, and next-gen offices with more sustainable elements will be the key themes for office markets in 2024,” said Arpit Mehrotra, Managing Director, Head of Office Services, Colliers India.

Bengaluru, Chennai, and Hyderabad recorded the best performances since the COVID-19 pandemic, with BFSI and engineering and manufacturing sectors witnessing double-digit growth from 10–12 percent in 2020 to around 16–20 percent in 2023, and engineering and manufacturing players surpassing technology firms in terms of demand. The tech sector”s contribution fell by 25 percent, despite overall strong demand.

Demand from Flex operators remained intact, at 8.7 Mn sq ft, and the flex space uptake in 2023 reached 24 percent higher than in 2022.Penetration in the Indian office market is expected to increase further in 2024, as developers are likely to opt for a core plus flex strategy for decision-making.

Global Capability Centers (GCCs) have accounted for almost 40 percent of the large deals in the top six cities, to which the technology and BFSI sectors contributed predominantly.

Capability Centers (GCCs) typically have large space requirements, and they too resumed their expansionary activities with greater fervor towards the second half of 2023, especially in the fourth quarter.

“Large sizes of 100,000 sq ft or more have contributed to almost 50% of the overall office space demand in India. Interestingly, more than half of the large GCC deals achieved closure in the last quarter of 2023, indicating renewed momentum in the GCC activity of the country. A large pool of talent, cost-effective rentals, adequate Grade A developments, and a favourable office market ecosystem will continue to uphold India’s vantage positioning from a capability centre perspective. Moreover, healthy demand from domestic firms across technology, BFSI, manufacturing, healthcare, and flex spaces will result in equally strong demand for office spaces in 2024,” said Vimal Nadar, Senior Director and Head of Research at Colliers India.