Office Space Real Estate Updates in India

India’s Grade A/A+ office market registered 62 msf of demand in CY’23, demonstrating resilience despite global uncertainties. As highlighted in the CRE Matrix & CREDAI India Office Report Q1 CY’24, average demand during the post-COVID period (2022–2023) stood at 66 msf—marking a 21% increase over pre-COVID levels recorded in 2018–2019.

The IT and BFSI sectors primarily drove this growth. Global companies continued expanding operations, leveraging India’s cost efficiency and deep talent pool. At the same time, startups and SMEs contributed significantly to demand, fueled by rapid digital adoption.

Co-working and Leasing Trends Strengthen

The co-working segment continued to grow steadily. It contributed around 10% of the total office demand. Companies also increased long-term commitments during the year. The weighted average lease term rose 7% to 62 months compared to 2019 levels. This trend reflects stronger occupier confidence and long-term planning.

Rental Growth and Demand Trends Across Cities

Office rentals increased significantly during the quarter. Pan-India Grade A/A+ rents rose by 14.5% year-on-year in Q4 CY’23. Noida, Chennai, and Hyderabad led this rental growth. Rising occupier demand pushed rental values upward.

Pan-India office demand declined by 12% year-on-year in CY’23. However, select cities outperformed the overall market. Pune recorded 25% growth in demand. Chennai followed with 14% growth. BFSI demand and large pre-commitments drove this increase.

India Office Market Fundamentals

India’s office market fundamentals remained stable in CY’23. Total demand stood at 62.2 msf, while supply reached 57.5 msf. The total office stock increased to 820.8 msf. Vacancy levels stood at 17.8%. Under-construction stock reached 238 msf, expected by Q4 2026. Passing rent stood at ₹85.3 per sqft per month. Market rent reached ₹97.1 per sqft per month.

Different sectors contributed actively to office demand. IT/ITeS led with a 26% share. BFSI followed with 17%. Co-working contributed 9%. These sectors continue to shape India’s office leasing landscape.

City-wise Office Market Performance

Bengaluru: Market Leader in Demand

Bengaluru remained India’s top office market. The city recorded 16.1 msf demand in CY’23. Supply stood at 14.4 msf. Total stock reached 220.3 msf. Vacancy remained low at 10%. Passing rent stood at ₹80.4 per sqft per month. Market rent stood at ₹74.0 per sqft per month. IT/ITeS dominated the market with a 47% share.

Delhi-NCR: Supply-Driven Market

Delhi-NCR recorded 9.8 msf demand in CY’23. Supply slightly exceeded demand at 10.1 msf. Total stock reached 164.7 msf. Vacancy remained high at 24.4%. Passing rent stood at ₹87.4 per sqft per month. Market rent stood at ₹82.8 per sqft per month. The market remained supply-heavy during the year.

MMR: Demand Outpaces Supply

MMR witnessed strong demand in CY’23. Demand reached 10.1 msf, while supply stood at only 3.5 msf. Demand remained 2.8 times higher than supply. Total stock reached 141.5 msf. Vacancy improved to 18%. Market rent increased to ₹136.1 per sqft per month. Strong BFSI demand supported this growth.

Hyderabad: Rising Supply and Vacancy

Hyderabad recorded 11.4 msf demand in CY’23. Supply exceeded demand at 17.2 msf. Total stock reached 135.3 msf. Vacancy increased to 24.7%. Market rent stood at ₹70.9 per sqft per month. The market saw strong supply additions during the year.

Pune: High-Growth Market

Pune showed strong growth in CY’23. Demand reached 7.9 msf, while supply stood at 5.4 msf. Demand exceeded supply by 1.5 times. Total stock reached 82.2 msf. Vacancy remained stable at 13.9%. Market rent stood at ₹79.2 per sqft per month.

Chennai: Stable and Balanced Market

Chennai maintained balanced market conditions. Demand reached 7.0 msf, while supply stood at 6.9 msf. Total stock reached 76.2 msf. Vacancy stood at 16.8%. Market rent stood at ₹62.2 per sqft per month. The city showed steady growth with balanced supply and demand.

India’s office market shows strong future potential. Occupiers continue to prefer long-term commitments. Developers are likely to accelerate new supply pipelines. New cities and flexible formats will drive future growth. India’s growth story will continue to attract global occupiers.

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There was a time when small businesses used to pay rents for the entire premises to conduct their business. Now, start-ups and individual business owners can rent a desk in a co-working space instead of paying for the complete space. Currently, this trend is not simply limited to the metro cities of the country, as start-ups of small Indian cities are also observed using such office space for growing their businesses.

Nowadays, Tier II and III cities of India are witnessing a massive rise in the number of startup businesses. It is believed that the need for startup office space is also surging in smaller cities. For this reason, now co-working spaces have become extremely popular in these cities.

In this blog article, we will discuss coworking meaning and how it has become a growing trend in smaller cities of India:

What is Coworking?

Coworking in India is an arrangement in which employees or different companies or even freelance individuals share an office space, thereby saving cost and convenience by using common infrastructures like equipment, utilities, receptionist and custodial services, and in specific cases refreshments and parcel acceptance services.

This concept is beneficial to independent contractors, freelancers, independent scientists, remote workers, and so forth. Moreover, co-working assists workers to avert the feeling of social isolation they may experience while working remotely or if they are in transit. This is a great way to remove distractions and focus on your work completely. The majority of co-working spaces charge membership dues.

Changing Startup Culture in Smaller Cities

Even though metropolitan cities such as Mumbai, Delhi, Hyderabad, and Bengaluru demonstrate a dynamic startup culture, the Indian innovation landscape isn’t restricted to them. Startups in smaller cities have begun to make significant differences these days and have made strong strides to establish themselves in the country.

Currently, startups are established in cities such as Pune, Ahmedabad, Bhubaneswar, and Jaipur, amongst others. This is due to the infrastructure support, local investor confidence, state government amenities, and the availability of talent. With the growing development of the Indian metro, startups are rapidly increasing across smaller cities alongside bigger ones.

Surge in Requirement for Coworking Space in Smaller Cities

Since innovation is increasing and growing across India, the availability of shared workspaces is also needed. Startup culture has slowly but surely become popular in Tier 2 and 3 cities. These office spaces also offer young talent and startups a solid platform for growing irrespective of where belong to.

With time, rental rates are also surging a lot. This is why it’s difficult for a small startup business to sustain itself on its own. It’s extremely expensive for a company of any size to lease a traditional workplace in an urban area. The condition is far worse for individuals and startups that are looking to establish but are apprehensive about the cash flow.

To lease out a traditional workplace, you will need to determine a fixed initial capital that integrates advance maintenance fees, refundable money, and other expenses for mandatory entities such as setting up electrical fittings, gadgets, office furniture, and so forth. In order to curtail costs and the rise of startups, it has led to the concept of coworking in Ahmedabad or coworking in Pune.

CRE Matrix is India’s leading real estate data analytics company India. It offers accurate and authentic data on co-working spaces that can help in competitive analysis.

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Tag: office space

India Office Market Q4 CY’23: Demand Holds Strong, Rentals Rise