- Total Gross Leasing Volume (GLV) crosses 66.7 Million Square Feet (MSF) in 9 months, set to surpass 80 MSF in 2024
- GCCs continue to drive demand, record 30% of GLV in Q3 2024; Highest share ever amongst all quarters since 2020
The Indian office sector continued its impressive growth, with Gross Leasing Volume (GLV) reaching 24.8 Million Square Feet (MSF) across the Top 8 cities in Q3 2024, marking the second highest quarterly leasing volume in the sector’s history, according to Cushman & Wakefield’s Q3 2024 Office Data. This represents a staggering 66.4% YoY growth in GLV and a strong 14.3% QoQ growth, showcasing overall healthy market dynamics. Gross leasing volume, which factors in all leasing activity in the market, including renewal of contracted terms by corporates, is an indication of overall market activity. This quarter’s impressive surge has been primarily led by fresh leasing, contributing over 75% of the total GLV, indicating enormous demand for new office spaces across the Top 8 cities.
Net absorption, which is a barometer of real demand or expansion of occupied space in the market, stood at 12.6 MSF for the quarter across all cities. This reflects a 32% increase quarter-over-quarter and a 54.7% increase year-over-year. Bengaluru, once again, topped the list with 4.09 MSF of net absorption, followed by Mumbai at 2.6 MSF and Delhi at 1.8 MSF. Pune also experienced a notable surge, reporting 1.5 MSF - a 2x growth quarter-over-quarter and a 68.8% increase year-over-year.
Cushman & Wakefield’s data also highlighted a historic low in vacancy rates, dropping to 17.1% - the lowest recorded in 14 quarters. This sharp decline of 60 basis points (bps) quarter-over-quarter indicates a thriving demand for office spaces. Ahmedabad and Mumbai experienced the most significant drop in vacancy rates – with reductions between 180-230 bps - followed by Kolkata and Delhi-NCR, with a fall between 110-140 bps.
The data further revealed the Year Till Date (YTD) numbers - with GLV crossing 66.7 MSF in the first 9 months of 2024 - close to 90% of the full-year volume that the sector witnessed in 2023, showcasing unprecedented momentum, given that 2023 witnessed the highest ever leasing volume in Indian office space history. With the quarterly leasing run rate of the last 8 quarters/ 2 years clocking approximately 20 MSF, a similar run rate would push the GLV for 2024 to more than 80 MSF - breaking last year’s historic record and clocking 70 MSF+ for the third year running. Net Absorption for YTD, meanwhile was recorded at 33.67 MSF, on course to cross a historic high of 43 MSF.
Despite this strong demand, the report noted a slower influx of new office supply, with an average quarterly addition of ~10 MSF during the first nine months of 2024- the slowest addition in supply in the post-Covid period, with YTD 2024 totalling up to 30 MSF. Coupled with the strong demand, rentals across the top 8 markets also increased by 4-5% y-o-y on average, with cities such as Mumbai, Chennai, Ahmedabad and Delhi-NCR witnessing the steepest rise in rentals. The rise in rentals is also in part attributable to the shortage of supply in the core markets, where the vacancy is yet tighter and averages in single digits. However, with projections indicating a rise in supply in the coming months, the market may be better positioned to meet ongoing demand.
In terms of the occupiers, Global Capacity Centres (GCCs) continued their robust leasing momentum with an overall contribution to total GLV standing at 30%. From a sectoral perspective, IT-BPM, Flexible Workspaces and BFSI were the major contributors towards the quarter’s GLV, with a 32%, 15% and 14% share respectively. On a city level, Bangalore maintained its strong trajectory by contributing 27.7% to the total GLV of the quarter, followed by Mumbai (21%) and Delhi NCR (15.1%) respectively.
Anshul Jain, Chief Executive, India, Southeast Asia and APAC Tenant Representation, Cushman & Wakefield said, “Strong market fundamentals have sustained extraordinary leasing momentum in the Indian office market, as evidenced by the remarkably low vacancy rates across the top 8 markets. This growth spurred by Global Capability Centers (GCCs) cements India’s status as a key outsourcing hub for innovation and growth. The segment remains highly buoyant with leasing set to breach 80 MSF by this year by a wide margin.”
Veera Babu, Managing Director, Tenant Representation, Cushman & Wakefield added, “With gross leasing volume already exceeding 66 MSF, we've reached nearly 90% of the total GLV recorded in 2023. Given that the average quarterly GLV has been around 20 MSF in recent years, it’s highly probable that the full-year total would cross 80 MSF, setting a new record. The decline in vacancy rates clearly indicates strong demand for office spaces, particularly in light of the limited supply currently in the market. While we expect an increase in supply in the near future, the prevailing market dynamics suggest that demand will likely continue to outstrip availability, potentially driving rental prices higher in key markets.”
