According to Savills India, the office space market in India is expected to absorb over 70 million square feet this year, with demand reaching 55.1 million square feet from January to September-a 30% year-on-year increase. Major cities like Bengaluru, Delhi-NCR, and Mumbai accounted for 66% of total leasing activity, with large deals constituting 50%. Despite a slowdown in new completions, vacancy rates dropped to 15.5%. Bengaluru led with 6.2 million square feet absorbed in Q3 2024, while Delhi-NCR saw a remarkable 92% increase in absorption. Overall, the market is driven by technology, BFSI, and flexible workspace sectors.
According to a report by Savills India, the office space market in the country is projected to absorb over 70 million square feet this year. Demand reached 55.1 million square feet from January to September 2024, reflecting a 30% year-on-year (YoY) increase across six major cities. The year-to-date (YTD) leasing activity has established a new record for the January-September period, matching the full-year performance of 2022. With just seven million square feet left to exceed the total for 2023, absorption levels in 2024 are anticipated to range between 70 and 74 million square feet. In Q3 FY25, office absorption reached 20.2 million square feet, representing a 28% increase compared to Q3 FY24.
Bengaluru, Delhi-NCR, and Mumbai together accounted for 66% of the total leasing activity during this period. Furthermore, large transactions made up 50% of overall leasing activity, with Bengaluru, Delhi-NCR, and Pune generating over 50% of their leasing through these significant deals. Despite the surge in demand, new office completions have slowed in the first nine months of 2024, with only 32.6 million square feet added, marking a 12% year-on-year decline. Consequently, vacancy rates dropped to 15.5% by the end of September.
Naveen Nandwani, Managing Director of Commercial Advisory and Transactions at Savills India, stated that the demand is expected to be driven by sectors such as technology, BFSI, flexible workspace, and engineering and manufacturing occupiers. Bengaluru experienced an absorption of 6.2 million square feet in Q3 2024, marking a significant year-on-year increase of 48%. Large-sized deals (100,000 square feet and above) continued to dominate the leasing landscape, comprising 67% of the total activity. In contrast, Chennai recorded an absorption of 1.8 million square feet in Q3 2024, reflecting a year-on-year decline of 35%. Here, large deals of 100,000 square feet and more accounted for 42% of the leasing activity.
Delhi-NCR saw an absorption of 4.0 million square feet in Q3 2024, which represents an impressive 92% increase compared to the previous year. However, the year-to-date absorption totaled 7.6 million square feet, a 6% decrease compared to the same period in 2023. The region is projected to achieve a gross absorption of 11-12 million square feet in 2024. Gurugram accounted for the highest share of leasing activity in Q3 2024, contributing 64% of the total. Within Gurugram, the Gurugram SBD micro market led the way, representing 49% of the city's leasing activity. Noida followed as the second-largest contributor with a 27% share, while Delhi captured 9%.
In Mumbai, absorption reached 3.2 million square feet in Q3 2024, reflecting a year-on-year increase of 35%. Mid-sized deals (ranging from 25,000 to 99,999 square feet) were the most prevalent, making up 36% of the leasing activity. Pune saw a gross absorption of 2.0 million square feet in Q3 2024, which is a 42% increase compared to the previous year. This growth was largely driven by financial services occupiers who pre-leased large spaces totaling 1.1 million square feet.
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