India's Office Space Demand Drives Rental Growth Despite Global Decline; Vestian Report
While global office rental markets continue to face headwinds, India’s office sector is bucking the trend with sustained growth in office leasing and rentals. According to research by Vestian, 2024 reported the highest ever leasing of 70.7 Mn sq ft, registering an annual increase of 16%. Sub-dollar rentals across India’s top seven cities fuelled this momentum, making the country a key outlier in an otherwise subdued global landscape.
In stark contrast to major global cities like New York, Seattle, Boston, Hong Kong, and Shanghai, which have witnessed rental declines over the last five years, India witnessed a steady upward movement. Notably, while some Western markets such as London and Miami posted increases of 31% and 53% respectively, the broader global sentiment reflects a slowdown due to rising vacancy rates and rapidly changing workplace strategies.
India’s office market is expected to maintain this growth pattern in the future, majorly driven by strong leasing momentum, favorable demographics, and strategic infrastructure development.
Shrinivas Rao, CEO of Vestian, affirms that the decline in office space rents in the global market is influenced by the emergence of technologies like generative AI, as well as changes in office space utilization strategies. These factors contribute to the uncertainties faced by the office sector. The combination of reduced demand, along with businesses downsizing or relocating, has led to higher vacancy rates globally, which in turn puts downward pressure on rents.
Furthermore, in 2024 alone, rental rates in Indian cities surged between 3.8% and 8.2% compared to the previous year. India remains resilient, driven by strong demand from the IT sector and Global Capability Centers (GCCs). While global cities continue to see demand for premium office spaces, India’s affordability and expansion-driven leasing set it apart. As a cost-effective hub, India is poised for steady growth.
Shrinivas Rao, CEO of Vestian, stated that the influx of new businesses and company expansions has led to significant demand for office spaces in India. Global firms are aggressively seeking office space in India due to robust economic growth compared to other major economies of the world, rich demographic dividend, large consumer base, rapid urbanization, and the easy availability of skilled workforce at competitive rates, particularly in technology and finance. This demand is driving the need for high-quality office spaces.
Prime commercial hubs like Mumbai's BKC and Delhi's central business district (Connaught Place and adjoining area) command high rentals, with average rent reaching USD 3-4 per sq ft a month. Strong economic activities, upcoming mega infrastructure projects, and the expansion of Global Capability Centers (GCCs) continue to drive rental appreciation across the major cities of India.
