Office Rents in Top Indian Cities Surpass Pre-Pandemic Levels in 2024
Office rents across India's top six cities have surpassed pre-pandemic levels for the first time in 2024, with cities like Hyderabad and Pune leading the recovery. Demand in the commercial real estate market has solidified, setting a new norm for annual s
Office RentsReal EstateCommercial PropertyRecoveryIndiaReal Estate NewsOct 23, 2024
The report highlights that certain cities such as Hyderabad and Pune achieved pre-pandemic rental levels as early as 2022. Bengaluru and Chennai followed suit in 2023, while Delhi-NCR and Mumbai completed the recovery cycle in 2024. Overall, Delhi-NCR and Pune saw the highest rise in average rentals at about 8% each during the five-year period, followed by Mumbai and Chennai with a 5-6% rise.
Rapid Demand Recovery
In the post-pandemic era, demand recovery in the office market has been swift, following a steep 'V-shaped' recovery trajectory. After a period of subdued demand in 2020 and 2021, leasing activity had fully bounced back by 2022. Since then, each year has seen new all-time-high Grade A office space uptake at the national level.
Rental recovery, although slower than the demand recovery trajectory, has finally been fully complete, forming an elongated 'U-shaped' pattern. Arpit Mehrotra, Managing Director of Office Services at Colliers India, stated, “Although the rental growth will vary across cities, the annual increase in average quoted rentals at the end of 2024 is likely to be higher for certain cities like Delhi NCR and Pune compared to other markets. As demand in Indian commercial real estate solidifies, annual space take-up to the tune of 60 million sq ft is likely to be the new norm in the medium-term.”
Core Micro Markets Outperform
Select core micro markets across the top six cities have witnessed up to 25% rental growth during the 2019-2024 period. These micro markets, which are typically located in central business districts and secondary business districts, have seen high demand across occupier segments, leading to higher rental growth compared to the 2-8% city-level appreciation during the same period.
For instance, core micro markets in Delhi-NCR such as Golf Course Extension Road, Noida Expressway, and Cyber City have seen up to 25% rise in rentals. High activity micro markets in Bengaluru, such as Outer Ring Road (ORR) and Whitefield, have witnessed a 5-10% surge, compared to the 2% city-level rental growth during 2019-2024. Similarly, office rentals in other core micro markets like OMR Zone 1 in Chennai and Goregaon/JVLR and BKC in Mumbai have surged by 10-20% from pre-pandemic levels.
Demand Breaches 250 Million Square Feet Mark
The six major office markets in the country have witnessed a cumulative Grade A office space demand of 264 million square feet since 2019. Despite the demand blips in pandemic-affected years, consecutive record-breaking leasing activity has helped in maintaining the growth momentum. At an aggregate level, supply infusion has largely followed demand revival, as evidenced by the cumulative demand-supply ratio of 1.1 during 2019-2024.
A city-level analysis of demand-supply contours reveals interesting insights. Mumbai, with a demand-supply ratio of 2.1, has seen a drop in vacancy levels since 2019, with demand outpacing supply significantly. In Delhi-NCR, with demand consistently exceeding supply, vacancy levels have dropped from around 25% a few years ago to about 20% currently. On the other hand, Hyderabad, traditionally a high-supply market, has seen vacancy levels rise steadily to around 25%.
Future Outlook
Since 2019, cumulative demand and supply across the six major office markets have been recorded at 264 and 234 million sq ft, respectively. With overall demand and supply mirroring each other, vacancy levels are anticipated to remain range-bound across most cities. Vimal Nadar, Senior Director and Head of Research at Colliers India, noted, “Average office rentals can further firm up and witness up to 10% annual growth across key cities in 2024.”
About Colliers
Colliers is a leading global real estate services and investment management company. With a presence in over 68 countries, Colliers provides a wide range of services including property management, valuation, and consulting. The company's expertise in commercial real estate has made it a trusted advisor for businesses and investors looking to capitalize on the dynamic real estate market in India.
Conclusion
The recovery of office rents in India's top six cities is a positive indicator of the resilience and adaptability of the commercial real estate market. As demand continues to solidify, the sector is poised for further growth, driven by the increasing preference for Grade A developments in well-connected and residential areas.
Frequently Asked Questions
Which cities in India have seen the highest increase in office rents since 2019?
Delhi-NCR and Pune have seen the highest increase in office rents, with an 8% rise each during the five-year period from 2019 to 2024.
What is the current demand-supply ratio for office space in Mumbai?
Mumbai has a demand-supply ratio of 2.1, indicating that demand has significantly outpaced supply, leading to a drop in vacancy levels.
Which micro markets in Delhi-NCR have seen the highest rental growth?
Core micro markets in Delhi-NCR such as Golf Course Extension Road, Noida Expressway, and Cyber City have witnessed up to 25% rental growth during the 2019-2024 period.
How has the overall demand for Grade A office space in India fared since 2019?
The six major office markets in India have witnessed a cumulative Grade A office space demand of 264 million square feet since 2019, with consecutive record-breaking leasing activity maintaining the growth momentum.
What is the anticipated rental growth in key cities in 2024?
Average office rentals in key cities are expected to witness up to 10% annual growth in 2024, according to Vimal Nadar, Senior Director and Head of Research at Colliers India.
Related News Articles
Indian Realty Giants Unload Properties Worth Rs 1.17 Lakh Crore in FY24
Leading real estate companies in India, such as Macrotech Developers and Signature Global, have sold properties worth a staggering Rs 1.17 lakh crore in FY24.
Soaring Demand Drives Up Property Prices in Delhi-NCR and MMR
Average housing prices in Delhi-NCR and Mumbai Metropolitan Region (MMR) have risen by nearly 50% in the last five years, driven by higher demand and infrastructural developments.
Aditya Birla Real Estate: Pune Launch on the Cards, Expanding in Thane and Sarjapur
In a recent post-earnings call, the management of Aditya Birla Real Estate Ltd, formerly known as Century Textiles and Industries Ltd, announced the upcoming launch of a new project in Pune, along with plans to expand in Thane and Sarjapur.
ACRES 2025 Showcases Over 400 Property Projects in Egypt Pavilion
Organised by the Sharjah Chamber of Commerce and Industry (SCCI) in collaboration with the Sharjah Real Estate Registration Department (SRERD), the ACRES 2025 event is set to feature an extensive array of property projects from Egypt, highlighting the cou
The 23-Year Journey: How a UP Man Purchased Dawood Ibrahim’s Mumbai Shop
Hemant Jain took a significant risk in 2001 by purchasing a Mumbai shop linked to Dawood Ibrahim. Despite numerous bureaucratic obstacles, he finally managed to register the property after a grueling 23-year battle.
What Are the Top 20 Expectations for the Budget 2025-26?
As the Union Budget 2025-26 approaches, scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1 (Saturday), the real estate industry and other sectors are bracing for significant changes and potential boosts. Here’s a detailed look