Commercial office space activity in India's top 7 cities showed a subdued first half of fiscal year 2024, with minimal growth in net absorption and new completions compared to the previous year. Rental values, however, saw a 7% rise due to increased construction costs. Chennai led with a 10% increase in average monthly office rental values, and Hyderabad followed with an 8% growth. Despite global layoffs, office activity remained steady, with a modest 5% yearly increase in new completions. The year is expected to end with 55–57 million square feet of office demand, lower than last year but higher than anticipated.
During the first half of fiscal year 2024, commercial office space activities across the top seven cities in India exhibited a lacklustre performance. Both net absorption and new completions remained largely stagnant in comparison to the same period the previous year, according to data shared by ANAROCK. New office supply across these cities witnessed a modest 5% increase in H1 FY24 compared to H1 FY23, while net office absorption experienced a marginal yearly decline of 1% during this period.
Notably, average rental values across the top seven cities showed a 7% growth in H1 FY24 when compared to the same period in FY23. This growth was primarily attributed to increased construction and input costs. ANAROCK Research data reveals that Grade A office rental values averaged Rs 83 per square feet per month during this period, compared to around Rs 77.5 per square feet in H1 FY23.
Chennai recorded the highest increase, with a 10% yearly jump in average monthly office rental values. During H1 FY24, Chennai's values rose from Rs 62 per square feet to approximately Rs 68 per square feet. Hyderabad experienced 8% yearly growth, with average monthly office rental values increasing from Rs 61 per square feet in H1 FY23 to around Rs 66 per square feet in H1 FY24. Other cities such as Bengaluru, Pune, and Kolkata each witnessed a 7% annual growth in office rental values during this period, while Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) registered a 5% increase each.
Meanwhile, Hyderabad surpassed Bengaluru with the highest influx of new office supply in H1 FY24, while Bengaluru continued to lead in net office absorption among the top seven cities in the same period. Despite expectations of a downturn in commercial office space demand due to global layoffs and shrinking business volumes, the activity remained largely unchanged in the H1 FY24 compared to the corresponding period in FY23.
According to a report by the Confederation of Real Estate Developers’ Associations of India (CREDAI) and market intelligence platform CRE Matrix, leasing activity picked up in the third quarter, with demand up 29% sequentially, aided by a 35% growth in supply. Bengaluru and Hyderabad contributed roughly half of total demand in the third quarter and 57% of the total supply.
The current calendar year is expected to close with office demand or absorption of 55–57 million square feet, lower than the 70 million square feet seen last year but higher than initially anticipated. In the first nine months of the current year, office demand was at 42 million square feet, with the last quarter expected to add 13–15 million square feet.
The total Grade A stock on a pan-India basis is currently at 770 million square feet, with another 257 million square feet under construction expected to enter the market in the next three years.
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