India's Office Space Demand Set to Surge: Engineering & Manufacturing and BFSI Sectors Lead the Way
Overall, with commercial real estate in India being increasingly defined by sustainability and quality, the report anticipates multiple opportunities for developers and investors to lead in sustainability and meet evolving occupier preferences.
Office Space DemandIndiaEngineering ManufacturingBfsiCommercial Real EstateReal EstateSep 14, 2024
Over the next three years (2025-27), engineering & manufacturing along with BFSI occupiers are expected to lease about 11-12 million sq ft of office space each on an annual basis, up from 8-9 million sq ft each in the past three years. These will together account for about 40% of the total office space demand.
Furthermore, the evolving occupier landscape has deepened the office market in terms of developer offerings too. Developers are increasingly agile in curating the built structure to suit occupier preferences. Thus, the overall office market has gradually matured from a “Supply-led” market to a more “Occupier-driven” market and is likely at a turning point to see heightened growth and scaling up over the next few years.
Demand from Global Capability Centres (GCC) and domestic-origin occupiers continue to witness traction and will contribute to demand expansion in the next 2-3 years. While the top six cities of Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune will continue to drive contours of commercial real estate in India, newer markets, especially tier II cities, are expected to emerge as high potential growth centres.
On the other hand, space uptake by technology firms will eventually stabilize at around 15 million sq ft as they continue to embrace hybrid and distributed working models. Additionally, flex space occupiers are likely to expand into new geographies, accounting for 15-20% of total office leasing in the next 2-3 years.
According to Arpit Mehrotra, Managing Director, Office Services, India, Colliers, “The paradigm of office space demand in India continues to evolve rapidly, and the pace has in fact become swifter in recent years with GCC demand likely to be on the upswing. Interestingly, GCCs reposition themselves as knowledge and innovation centres, and are likely to account for almost 40% of the Grade A office space demand in the next few years.
Going forward, as corporates increasingly implement decentralized work strategies, occupiers are likely to expand their offices in multiple locations with relatively smaller real estate footprint. Average transaction sizes can further decline to 35,000-40,000 in 2024 itself with volumes expected to further move upwards.
Overall, with commercial real estate in India being increasingly defined by sustainability and quality, the report anticipates multiple opportunities for developers and investors to lead in sustainability and meet evolving occupier preferences. Looking ahead, nearly 80% of the 160 million sq ft of upcoming supply over the next three years is expected to be green certified, underscoring the shift towards more sustainable real estate development.
Frequently Asked Questions
What is driving the surge in office space demand in India?
The demand is driven by shifts in demand characteristics, with engineering & manufacturing and BFSI sectors leading the way.
What is the expected annual leasing activity in Bengaluru?
Bengaluru can potentially witness annual leasing activity closer to 20 million sq ft.
What is the expected share of GCCs in Grade A office space demand?
GCCs are likely to account for almost 40% of the Grade A office space demand in the next few years.
What is the expected growth in office space demand in tier II cities?
Newer markets, especially tier II cities, are expected to emerge as high potential growth centres.
What is the expected share of green certified office spaces in upcoming supply?
Nearly 80% of the 160 million sq ft of upcoming supply over the next three years is expected to be green certified.
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