Office Leasing Surges 20.8% in 2024, Hits 72 mn sq ft: Knight Frank India

• 5 out of 8 markets set new benchmarks; Bengaluru registers highest ever absorption of 18.1 mn sq ft
• One-fourth of total transactions concentrated in Bengaluru in 2024
• Flex space leasing rose 52% YoY in 2024
• GCCs lead as the top office occupiers in H2 2024

Mumbai, January 07, 2025: In its latest assessment, Knight Frank highlights that 2024 was a landmark year for India’s office market, with gross leasing activity reaching unprecedented levels. Total office space absorption during the year stood at an impressive 71.9 million square feet (MSF), surpassing the previous peak achieved in pre-pandemic 2019 by a remarkable 19%. On a year-on-year (YoY) basis, office space transactions in 2024 recorded a substantial 20.8% growth compared to 2023, underscoring the sector’s dynamic performance.

This stellar achievement reflects India’s economic resilience, sustained GDP growth, robust domestic consumption, and the country’s increasing prominence in the global economic landscape. The exceptional demand for office spaces underscores the confidence of global and domestic businesses in India’s thriving business environment, cementing its position as a preferred destination for investment and expansion.

This assessment was the key highlight of Knight Frank India’s flagship annual report India Real Estate – Office and Residential (July – December 2024) which was released today.

India Facing business anchored the market accounting for 36% of total transactions at 25.9 mn sq ft, while GCCs represented 31% with 22.5 mn sq ft. Flex space operators were highly active, leasing 15.7 mn sq ft, a 52% YoY growth. Third-party IT services also saw a 21% YoY increase, reaching 7.9 mn sq ft.

All India Office Transaction and New Completion (2024)

Source: Knight Frank Research

As leasing activities remained robust, new office completions also saw a rise reaching 50.3 mn sq ft in 2024 registering 17% rise YoY. However, as supply remained subdued compared to leasing volumes, rents firmed up further across all markets over the course of the year encouraged by demand and a relatively lower supply. Hyderabad led the rental growth with 7% YoY followed by Bengaluru and Chennai at 6% YoY respectively in 2024.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “The Indian office market achieved an extraordinary milestone in 2024, recording a remarkable 21% YoY growth and exceeding the pre-pandemic 2019 peak by 19%. This performance is a testament to India’s resilient economic fundamentals and its growing prominence as a global business hub. The sustained demand for premium office spaces, coupled with occupiers’ confidence, has propelled transaction volumes to historic highs. As we move forward, India’s strategic appeal and innovative spirit will continue to position it as a global leader in the office market.”

End-User Assessment of Office Demand

India facing business continues to anchor Indian commercial real estate market with contribution of 36% of the overall transaction volumes in 2024 across eight cities in the country. With strategic business need to align with growing Indian markets, India facing businesses have increased their office absorption by 18% YoY to 25.9 mn sq ft in 2024. Almost 31% of the transacted volumes by India facing business were executed in Mumbai’s commercial market. India-Facing businesses took up 7.9 mn sq ft of office space in Mumbai and 5.5 mn sqft in NCR.

GCCs have contributed 31% of the office volume transactions or 22.5 mn sq ft in 2024. Bengaluru took up 41% of the overall GCC focussed transactional volumes, recorded at 9.3 mn sq ft in the year 2024. From half yearly perspective, GCCs emerged as the highest end-user occupier with 12.7 mn sq ft or 34% of the total transacted area during the period.

Segment-Wise Break Up of Office Transactions – 2024

Source: Knight Frank Research

Flex has witnessed its best performance with annual volume growth of 52% in 2024. The 15.8 mn sq ft taken up by flex operators represents a record high for this segment which is particularly encouraging as its market share had slipped toward the end of 2023. Co-working spaces constituted a substantial 68% of all flex space transacted during 2024 compared to 58% in 2023. More than 50% of the flex workspace take up were witnessed in two commercial markets – Bengaluru with 4.3 mn sq ft and NCR with 3.8 mn sq ft. The growth of flex spaces only accentuated more in H2 2024 with the 8.6 mn sq ft taken up by flex space operators translating to a massive 138% growth in YoY terms from 3.62 mn sq ft in H2 2023.

The absorption from third-party IT services has increased in six cities of the country which transpired into annual transacted volumes increasing by 21% YoY to 7.9 mn sq ft in 2024. Bengaluru (1.9 mn sq ft), Chennai (1.8 mn sq ft) were the biggest markets for the third-party IT services during the year. Hyderabad and Pune recorded third-party IT services transactions of 1.2 mn sq ft each in 2024.

The pandemic-induced shift to remote work temporarily paused office space take-up, leading to a demand shortfall. However, as businesses continued to grow during this period, demand for office spaces was bound to resurface. That moment has now arrived, with many companies reversing their accommodative stance on remote working. Today, we are witnessing record-high transaction volumes fuelled by both pent-up demand and new requirements from expanding businesses. India’s office market stands out globally, offering competitive rental values averaging around US$ 1 per square foot per month. Meanwhile, the institutionalization of commercial real estate has driven improvements in property quality, ESG standards, and wellness compliance.

Viral Desai, Senior Executive Director – Occupier Strategy & Solutions, Industrial & Logistics, Capital Markets and Retail Agency, Knight Frank India, said “The record office transaction volumes in 2024 reflect India’s strong economic prospects. India-facing businesses anchored demand, GCCs contributed 31% of transactions, and flex spaces saw a 52% YoY surge in absorption. Notably, transaction volumes reached historic highs in five of the eight leading markets, with occupiers across all categories expanding their presence. With a dynamic ecosystem and robust fundamentals, India remains the most vibrant and promising office market in the world.”

Five Markets set new office transaction records:

Continuing its premier position, Bengaluru recorded its historic-best office transactions of 18.1 mn sq ft in 2024 which was higher by 45.1% over 2023. Of the total transactions in the city, 52% were concluded by Global Capability Centres (GCCs). Having said that, third party IT Services companies remain the largest occupiers of the office stock in the city. The National Capital Region (NCR) witnessed office leasing activity totalling 12.7 million sq. ft., a new landmark, marking an annual growth of 25%. This growth was primarily driven by increased space uptake by Flex space operators. Similarly, Mumbai’s transaction volumes surged to 10.4 million sq. ft., also setting a new benchmark for the city, reflecting a significant year-on-year increase of 39.5%. Pune (8 mn sq ft) and Ahmedabad (3 mn sq ft) also recorded their best years in office leasing volumes.

New completions rise taking office stock close to 1 bn sq ft :

Office completion was recorded at a very robust 50.7 mn sq ft registering an annual growth of 17% over 2023, with high volume markets of Hyderabad recording new office space of 15.6 mn sq ft followed by Bengaluru which recorded new office space of 12.4 mn sq ft. Grade A Office Stock now stands over 972 mn sq ft.

While new office completions were robust, it still could not cover the demand for office spaces leading to a further improvement in vacancy rates which further improved at 14.6%. Demand outpacing completion of new offices in NCR (8.4%) and Chennai (6.8%) led these markets to see significant improvement in vacancy rates with both being in single digits. Hyderabad (18.3) and Pune (12.4%) alternately saw a rise in vacancy rates mostly due to influx of newly completed office space. As these markets rise in prominence, the new supply will be key in keeping the market competitive in the new year.

Rents firmed up across all markets over the course of the year, consistently higher since H1 2022, as Indian landlords have been able to negotiate better terms in a market that has seen the strongest office markets struggle globally. Rents grew between 3% and 7% YoY across all markets in H2 2024 with Hyderabad growing at 7% YoY while Bengaluru and Chennai grew at 6% YoY each respectively.

Market-wise rental movement

Source: Knight Frank Research