CREDAI–CRE Matrix Report: India's Grade-A Office Space Demand Surge in 2024

In the ever-evolving India commercial real estate sector, Grade-A office spaces are emerging as the focal point of a significant surge in demand, poised to exceed 70 million square feet (msf) in 2024. This transformative shift, as unveiled by a collaborative report by CREDAI and CRE Matrix, is underpinned by a multitude of factors and is set to redefine the dynamics of the country's commercial real estate market. 

Understanding the Surge 

The surge in demand for Grade-A office spaces during the first quarter of 2024 is remarkable, reaching 16.7 msf, marking a substantial 12 percent increase quarter-on-quarter (QoQ) and an impressive 14 percent rise year-on-year (YoY). Bengaluru, Mumbai Metropolitan Region (MMR), and Delhi-NCR have emerged as the primary contributors to this growth, collectively driving two-thirds of the total office demand. This surge underscores the resilience of the commercial real estate sector and reflects the growing confidence of businesses in India's economic prospects. 

Rental Market Dynamics 

A key highlight of the report is the consistent upward trajectory in market rentals across Grade-A spaces, evidenced by an 8.7 percent QoQ increase in Q1CY24. This surge in rentals reflects the robust demand dynamics and the evolving preferences of occupiers seeking premium office spaces equipped with modern amenities and state-of-the-art infrastructure. As businesses prioritize employee well-being and productivity, the demand for high-quality office spaces is expected to continue on an upward trajectory. 

Shift Towards Larger Deals: Exploring the Trend 

An interesting trend identified in the report is the increasing prevalence of larger deals, with 56 percent of the demand originating from occupiers leasing more than 1 lakh sqft. This surge in larger transactions underscores a growing preference for expansive office spaces to accommodate the evolving needs of businesses. Bengaluru, Hyderabad, and Noida emerge as pivotal hubs for these substantial transactions, offering a conducive business environment and ample growth opportunities for companies across sectors. 

Sectoral Dynamics: 

As businesses adapt to the new normal and transition back to office spaces, the IT/ITeS sector emerges as the frontrunner in leasing demand, constituting approximately 28 percent of office space requirements. The rapid digital transformation and the growing importance of technology in driving business operations have fueled the demand for office spaces in tech hubs like Bengaluru and Hyderabad. Concurrently, the BFSI sector witnesses a significant uptick in its share of leasing demand, rising to 20 percent in the first quarter of CY 2024. This trend is indicative of the sector's resilience and its strategic focus on expansion despite the challenges posed by the pandemic. 

Future Outlook and Projections 

Buoyed by robust economic fundamentals and substantial investments driving infrastructure development, the commercial real estate sector is poised for sustained growth. The report projects Grade-A office demand to surpass 70 msf in 2024, signaling lucrative opportunities for developers, corporates, and investors. With rentals on the rise in prime markets like NCR, Bengaluru, and Mumbai, secondary markets such as Pune, Chennai, Hyderabad, and Noida are expected to witness a surge in leasing activity, driven by the allure of high-grade office spaces. 

The collaborative report by CREDAI and CRE Matrix provides invaluable insights into the evolving dynamics of India's Grade-A office space market. With a surge in demand fueled by sectors such as IT/ITeS and BFSI, coupled with escalating market rentals, the commercial real estate sector presents a promising landscape for stakeholders. As India embraces the resurgence of returning to office spaces, developers, corporates, and investors stand poised to capitalize on the myriad opportunities unfolding in the thriving commercial real estate segment.