India’s office market on track for gross leasing to hit 70 million sq. ft by the end of 2024 – JLL
- Gross Leasing Activity (GLA) in Q3 (July-September) 2024 touched 19.89 million sq. ft, up 8.2% Q-o-Q (Quarter-on-Quarter) and second highest ever for a quarter. This is second only to Q4 (October-December) 2023.
- Flex becomes the highest contributor to quarterly gross leasing for the first time, with a 22.0% share.
- Global Capability Centres (GCCs) remain the dominant occupier group, driving 36.2% of all leasing activity. As a result, global occupiers continue to drive the market with a 56.8% share in Q3 leasing activity.
- Bengaluru continues to lead with a 24.6% share of leasing, followed by Delhi NCR with a 23.1% share.
Leasing activity continues to show tremendous momentum with the Q3 (July-September 2024) numbers at 19.89 million sq. ft, the second highest ever quarterly gross leasing volumes, JLL reported today. Interestingly, both quarters with the highest gross leasing numbers have been recorded in the post-Covid period, indicating the period of intense growth and robust demand that the India office market is currently witnessing.
For the nine-month period January – September 2024, gross leasing volumes now stand at 53.43 million sq. ft, the highest ever for this period and unmatched in the history of India’s office market. The strong fundamentals clearly have put India on track to witness a record-breaking year with projected gross leasing activity anticipated to hit 70 million sq. ft in 2024, surpassing the previous high seen just last year (2023).
The office market continues to build on its gains as the strong momentum is underpinned by demand across industry segments from both global and domestic firms. As India remains at the forefront of global firms RE plans and domestic economy stays resilient, occupier activity is on an accelerated growth curve with an anticipated longer runway going forward as well.
Bengaluru maintains its number one position in Q3 leasing activity: on nine months’ basis the leading cities in terms of gross leasing activity are Bengaluru, Delhi NCR, and Mumbai with a combined share of 63.6%.
Bengaluru remained the leader for the second straight quarter with a 24.6% share of the quarterly leasing activity, followed by Delhi NCR with a 23.1% share. These two cities have been interchanging their positions in the top two for some time but remain the markets with maximum occupier activity. Strong leasing activity was also recorded in Mumbai and Hyderabad in Q3, with their respective shares at 15.6% and 14.9%. Both these cities now combine for a ~50% share in India’s gross leasing activity for January-September 2024.
On a nine-month comparison, the January-September 2024 period is the highest ever for all cities, barring Chennai and Hyderabad. For Chennai the Jan-Sep 2024 is just 6.1% lower than its all-time high seen last year. For Hyderabad, the nine-month data is lower only to its 2019 performance.
Gross Leasing (million sq. ft)
| Market | Q2 2024 | Q3 2024 | Q-o-Q Change | YTD 2024 |
|---|---|---|---|---|
| Bengaluru | 6.13 | 4.90 | -20.1% | 14.12 |
| Chennai | 1.27 | 1.78 | 40.3% | 5.72 |
| Delhi NCR | 3.81 | 4.59 | 20.4% | 12.43 |
| Hyderabad | 2.40 | 2.97 | 23.5% | 6.74 |
| Kolkata | 1.19 | 0.22 | -81.8% | 1.49 |
| Mumbai | 2.24 | 3.10 | 38.7% | 7.45 |
| Pune | 1.34 | 2.33 | 74.0% | 5.49 |
| Pan India | 18.38 | 19.89 | 8.2% | 53.43 |
Source: Real Estate Intelligence Service (REIS), JLL Research
India’s office market sees double powered growth: Global occupiers drive demand even as local firms continue to expand:
India’s position as ‘office to the world’ remains intact as global occupiers continue to drive their Real Estate expansion plans in India. In Q3, they remained active with a 56.8% share of gross leasing volumes. On a cumulative basis, for Jan-Sep 2024, global occupiers have accounted for a 55.5% share.
Domestic occupiers have continued to remain active and now account for a 44.5% share in the nine months of 2024. Their post-COVID share in gross leasing stands at ~48% from 2022 till Sep 2024 compared to the ~35% share in the 2017-2019 period. The strong domestic occupier activity is also a key driver of resilience and renewed RE appetite in India office market.
Flex segment takes the lead; Industry-wide growth drives balanced market share.
“India’s office market has seen flex emerge as a powerhouse occupier segment,” said Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL. “Flex operators have claimed an unprecedented 22% of Q3 leasing activity, surpassing traditional frontrunners like Tech and BFSI. With a record-breaking 4.38 million sq. ft leased in Q3 alone, and 10.23 million sq. ft in the first nine months of 2024, the flex segment is on track to shatter its previous annual record set at 10.4 million sq. ft in the year 2019.
This trend, coupled with strong showings from Tech, BFSI, and manufacturing sectors, signals a more diverse and resilient office market. We’re witnessing a transformative period where India’s commercial real estate landscape is becoming increasingly broad-based and adaptable to evolving workplace dynamics,” he added.
India’s office market is becoming more broad-based, with a secular share emerging among various occupier categories. Flex for the first time emerged as the biggest occupier category with a 22.0% share in Q3 leasing activity, followed by Tech with 17.9%, BFSI at 16.5% and manufacturing/engineering at 13.8%. For the January-September 2024 period, Tech leads with a 24.4% share, with Flex accounting for a 19.2% share. BFSI and manufacturing/engineering are also major occupier sectors with their shares at 17.8% and 16.8%, respectively.
“The resilience of Global Capability Centers in India is unmistakable, commanding a 36.2% share of total leasing in Q3. What’s truly noteworthy is the driving force behind this growth: manufacturing/engineering and BFSI sectors. This underscores India’s exceptional talent pool across diverse industries. The trend has held steady throughout the first nine months of 2024, with BFSI, manufacturing/engineering, and tech sectors showing comparable shares in GCC space takeup.
This signals a growing demand for advanced R&D and innovation work across the board. With Karnataka’s new GCC Policy offering incentives and other states likely to follow suit, we’re poised for a significant boost to the ecosystem. This could usher in a fresh wave of GCCs while encouraging existing players to expand, capitalizing on India’s quality talent pool. The future looks promising for GCCs in India,” said Rahul Arora, Head – Office Leasing & Retail Services, Senior Managing Director (Karnataka, Kerala), India, JLL.
Net absorption** across the top seven cities at 12.16 million sq. ft, the highest so far this year and up 14.9% Q-o-Q
India’s net absorption for the top seven cities stood at 12.16 million sq. ft, up by a healthy 14.9% Qo-Q. In the quarter, Bengaluru accounted for 34.1% share of net absorption, followed by Delhi NCR, Mumbai, and Pune with near similar shares of 15.8%, 15.2% and 14.8%, respectively. On a ninemonths basis, net absorption is 31.03 million sq. ft, up by 19% Y-o-Y for the same period last year.
This indicates continuous expansion-driven activity which supports aggregate headcount growth and capacity augmentation for both global as well as domestic firms. In fact, over the past decade, JanSep 2024 aggregate net absorption for India is second only to 2019 same period numbers. During the nine-month period, Bengaluru, Delhi, and Mumbai lead the net absorption figures and combined for a 63.2% share.
Headline vacancy drops down to its lowest in two years to 16.8%.
Overall vacancy for the top seven cities was recorded at 16.8%, the lowest in two years as new space take-up remains robust. Vacancy also reduced Q-o-Q across Bengaluru, Chennai, Delhi NCR, and Kolkata.
Outlook: The office markets’ growth momentum is expected to pivot around expansion by existing GCCs and new entrants marking their presence in the country. Activity will remain centered around the core tech cities and other multi-sectoral ones based on the maturity levels of GCCs and their existing footprint in the country. Broad-based GCC activity across sectors will remain a key theme that supports sustained activity from this segment.
Domestic occupier activity is expected to circle around flex operators, financial services firms, manufacturing/engineering players and tech outsourcing majors. As India builds on its services economy platform and makes a play for the global manufacturing pie, the office market is poised to ride the tailwinds of the strong economic story and propel itself to greater heights.
*Gross leasing refers to all lease transactions recorded during the period, including confirmed pre-commitments, but does not include term renewals. Deals in the discussion stage are not included.
**Net absorption is calculated as the new floor space occupied less floor space vacated. Floor space that is pre-committed is not considered to be absorbed until it is physically occupied.