India’s office market entered 2024 with strong momentum, as highlighted in the India Office Report Q1 CY’24 by CRE Matrix and CREDAI. The report indicates a sharp rise in demand across major cities, even as new supply remained constrained during the quarter. This widening gap between demand and supply pushed rentals upward and reinforced a landlord-favourable market across the country, setting a strong tone for the year ahead.
Demand Sees Strong Growth Across Key Cities
India’s Grade A office demand recorded robust growth in Q1 CY’24. It increased by 12% compared to the previous quarter and grew 14% year-on-year. The top three cities—Bengaluru, MMR, and Delhi-NCR—played a dominant role, contributing nearly two-thirds of total demand. Together, they also recorded a strong 23% quarter-on-quarter growth.
This sustained demand reflects business expansion and improving occupier confidence despite global uncertainties.
Supply Declines, Tightening Market Conditions
Office supply dropped significantly during the quarter. Total supply stood at 10.5 million sq ft, marking a 38% decline from the previous quarter and a 5% drop compared to the same period last year.
Bengaluru and Hyderabad dominated new completions, contributing around 65% of the total supply. However, the overall reduction in new supply led to tighter market conditions and a marginal decline in vacancy levels.
Vacancy Softens as Supply Remains Limited
The limited addition of new office spaces led to a slight improvement in vacancy levels across India. Vacancy declined by 50 basis points to reach 17.2% in Q1 CY’24.
This indicates a gradual absorption of available stock, supported by steady leasing activity across key markets.
Rentals Continue to Rise Across Major Markets
Rental values continued their upward trajectory during the quarter. On a pan-India basis, rentals increased by 8.7% quarter-on-quarter and are now inching closer to the ₹100 per sq ft mark.
At the same time, the gap between market rent and in-place rent widened to around 14%. This widening spread reflects strong landlord pricing power. Cities such as Bengaluru, Pune, and Hyderabad witnessed noticeable rental growth, further reinforcing this trend.
Sectoral Demand Remains Diverse
Leasing activity remained driven by a mix of sectors, with IT/ITeS continuing to lead the market. The sector contributed 28% of total demand, supported by a gradual return-to-office trend. Meanwhile, the BFSI sector strengthened its position, increasing its share to 20% in Q1 CY’24.
Mumbai and Chennai together accounted for nearly half of BFSI demand. In the IT/ITeS segment, Bengaluru led with a 35% share, while Noida emerged strongly with a 20% contribution, overtaking Hyderabad during the quarter.
Large Deals Drive Leasing Activity
One of the most notable trends in Q1 CY’24 was the dominance of large-sized transactions. A significant portion of leasing activity came from occupiers taking up large office spaces, highlighting confidence in long-term expansion.
- 56% of demand came from deals above 1 lakh sq ft
- This was up from 36% in Q4 CY’23
- It also increased from 33% in Q1 CY’23
Bengaluru, Hyderabad, and Noida together contributed 66% of these large transactions, making them key hubs for big-ticket leasing.
City-Level Performance Highlights
City-level trends varied based on demand-supply dynamics, but most markets showed resilience and steady growth.
Bengaluru remained the top performer, driven by strong IT demand and low vacancy levels. MMR saw demand far outpace supply, resulting in a tight market with a high demand-to-supply ratio. Delhi-NCR maintained stable growth, with Noida emerging as a key demand driver.
Hyderabad experienced a supply-heavy quarter, which kept vacancy levels relatively high despite healthy demand. Chennai stood out with tight market conditions due to limited supply and strong demand. Pune continued to show balanced growth, supported by steady leasing activity across sectors.
Market Fundamentals at a Glance
The overall market fundamentals highlight the scale and strength of India’s office sector:
- Total Grade A stock stood at 839.8 msf
- Under-construction supply reached 330.8 msf
- Q1 CY’24 demand was 16.7 msf
- Q1 CY’24 supply was 10.5 msf
These numbers underline the depth of the market and its growth potential.
Looking ahead, the outlook for India’s office market remains positive. Demand is expected to cross 70 msf in 2024, supported by strong economic fundamentals and continued investments in physical and digital infrastructure.
Large occupiers are expected to continue expansion, while supply is likely to gradually pick up in the coming quarters.
Q1 CY’24 reinforces a clear market trend—demand is rising faster than supply. This dynamic is pushing rentals higher and strengthening landlord leverage. With strong leasing activity, increasing large deals, and sectoral diversity, India’s office market is well-positioned for sustained growth in 2024.
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Media Mentions
- The Economic Times: India’s office leasing demand likely to cross 70 million sq ft in 2024.
- Construction Week: India’s need for grade A office space expected to reach over 70 million sq-ft, says CREDAI-CRE Matrix report.
- Money Control: India’s Grade-A office space demand to cross 70 msf in 2024: CREDAI–CRE Matrix report.