by THO
South Indian cities lead in commercial leasing, with a 26% rise in average rent over six years. Bengaluru tops the list with a 26% increase in monthly office rentals, followed by Hyderabad at 25% and Chennai at 20%. In contrast, NCR in North India experienced a rental growth of 10%, Anarock Research has said.
Bengaluru leads with a 26% rise in office rentals in the period – from ₹74 per sq. ft. per month in 2019 to ₹93 per sq. ft. per month in 2024, followed by Hyderabad with 25% growth – from ₹56 per sq. ft. in 2019 to ₹67 per sq. ft. in 2024 and Chennai with 20% rise – from ₹60 per sq. ft. in 2019 to ₹75 per sq. ft, it said
In contrast, NCR in the North saw the least average monthly rental growth of 10% in the period – from ₹78 per sq. ft. per month in 2019 to ₹86 per sq ft in 2024.
Western cities including Pune saw 19% growth – from ₹68 per sq. ft. to ₹81 per sq. ft. in 2024 while MMR saw 13% growth – from ₹124 per sq. ft. in 2019 to ₹140 per sq. ft. in 2024, it showed.
Meanwhile, despite the massive new supply addition of over 48.11 mn sq. ft. in 2024 across the top 7 cities, office vacancies dropped to 16.5% in 2024 as against 17.8% in 2023. However, in comparison to 2019 when vacancies in the top 7 cities stood the lowest at 13.50%, the office vacancies continue to be higher presently. Notably, among the top 7 cities, Chennai had the least office vacancy of 9.30% in 2024.
“Bengaluru, Hyderabad and Chennai has taken the lions’ share of space absorption. These cities have had an average growth of 25% in rentals over the last 6 years with 57% share in new supply; this is due to its robust IT infrastructure ecosystem with availability of skilled workforce that has enabled corporations to invest in these cities,” said Peush Jain, MD-Commercial Leasing and Advisory, ANAROCK Group.
“Driven by strong demand primarily from the technology sector and flex spaces, most key markets would see sustained office space demand in next 6-8 quarters,” he said.
“As India continues to be one of the fastest growing economies, global corporates will look to establish their GCCs for expansion. The start-up ecosystem has again gained momentum and they too will be major drivers of office demand alongside the BFSI sector,” he added.
South Indian cities see highest new office supply
In the last six years (2019-2024) a total of nearly 283.21 mn sq. ft. of office space has been added across the top 7 cities with 2022 recording the highest new supply addition of 57.75 mn sq. ft.
Overall, the South cities added nearly 172.96 mn sq. ft. of office space comprising a whopping 61% overall share. Western cities added over 60.31 mn sq. ft. space or 21% share. NCR added 17% share or approximately 47.39 mn sq. ft. new office supply, the report said.
The Southern cities of Hyderabad, Bengaluru and Chennai comprised a 57% share or approximately 27.65 mn sq. ft. This was followed by the Western cities of MMR and Pune with 30% share or approximately 14.5 mn sq. ft. North’s NCR comprised just 12% overall share or approximately 5.93 mn sq. ft. area, the report showed.
Sector-wise transaction data trends indicate the growing prominence of co-working sector in the last six years. Back in 2019 this sector comprised 15% share of gross leasing across the top 7 cities. The share of co-working jumped up to over 25% in 2023 but 2024 saw a slight decline to over 21% share, the report showed.
Further, the BFSI sector too has seen rising demand in the period with its overall share increasing from 7% in 2019 to 17% in 2024. In contrast, the IT/ITeS sector share in gross absorption has come down to just 28% in 2024 from 42% in 2019, it added.
