Office Leasing in Top 6 Markets Rises 16% Annually to 15.8 Million Sq Ft in Q2 2024: Colliers Report

Office market continued its strong performance in Q2 2024, registering 15.8 million square feet of office leasing across the top 6 cities, marking a notable 16% rise over previous quarter. 4 out of 6 cities saw more than 20% increase in office leasing in the second quarter on a sequential basis, signalling robust occupier confidence and market sentiment. Bengaluru and Mumbai led the office demand in Q2 2024, cumulatively accounting for more than half of India’s leasing activity. Office space demand in these two cities were driven by occupiers from diverse sectors such as BFSI, Technology and Engineering & Manufacturing. 

After a prolonged phase of steady demand, Mumbai has seen a significant 3.5 million square feet of leasing during this quarter, twice the levels as compared to Q2 2023. This is mainly attributable to strong demand from newly completed office supply during the quarter. 

“Driven by consistent demand across consecutive quarters, 2024 has already seen impressive leasing activity to the tune of 29.4 million square feet of office space, marking a 19% increase compared to the same period last year. The demand for quality office spaces continues to surge, reflecting the confidence of occupiers and investors alike. Anticipated easing of global financial headwinds and continued resilience in the domestic economy augurs well for sustained growth in India’s office market. A strong H1 performance has set the tone for office space demand to comfortably surpass 50 million square feet for the third consecutive time in 2024." says Arpit Mehrotra, Managing Director, Office services, India, Colliers.

*Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Nearly 23.0 million square feet of Grade A supply added in H1 2024

During Q2 2024, new supply across the top 6 cities surged 6% YoY, at 13.2 million square feet. Mumbai accounted for 30% share in new supply, followed by Hyderabad at 27% share. Interestingly, on account of few prominent projects receiving completion certificates in Mumbai, new supply in Q2 2024 stood at 4.0 million square feet, the highest incremental quarterly supply in the past 3-4 years. Overall, with significant project completions and substantial materialization of pre-commitments, the first six months of 2024 have been particularly strong for the Mumbai office market.

With highest ever quarterly leasing, flex space momentum to continue in 2024

Technology and Engineering & Manufacturing remained the front runners during Q2 2024, accounting for almost half of the total demand during the quarter. Flex spaces also saw healthy leasing of 2.6 million square feet across the top 6 cities, highest in any quarter. Bengaluru and Delhi-NCR accounted for 65% of the flex space leasing activity, indicating rising demand for such spaces in these markets. 

“Overall office leasing continues to remain broad based in the first half of 2024. Although, with 25% share, Technology sector drove office demand during H1 2024, leasing activity by occupiers from BFSI and Engineering & Manufacturing sectors witnessed healthy traction. Flex space activity across the major cities continues to grow from strength to strength. Flex operators have already leased about 4.4 million square feet of office space in H1 2024, underscoring the occupiers’ continued preference for flex spaces. This also reflects the evolving needs for agility and adaptability in the modern business environment”, says Vimal Nadar, Senior Director and Head of Research, Colliers India.

Overall, with demand outpacing supply, vacancy levels remained under check across the major markets, hovering around 17% by the end of Q2 2024. While rentals have increased as compared to the previous year, they have largely remained stable on a sequential basis.

Conclusion

The Indian office market demonstrated robust growth in Q2 2024, with 15.8 million square feet of office leasing across the top six cities, marking a 16% increase from the previous quarter. Bengaluru and Mumbai spearheaded this demand, driven by sectors such as BFSI, Technology, and Engineering & Manufacturing. Notably, Mumbai experienced a substantial rise with 3.5 million square feet of leasing, double the volume compared to Q2 2023, due to new office supply. The first half of 2024 recorded a total of 29.4 million square feet leased, a 19% increase from the same period last year. The introduction of 13.2 million square feet of new supply in Q2 2024, along with record flex space activity, further bolstered market performance. With strong fundamentals and consistent demand, the market is poised to exceed 50 million square feet of leasing for the third consecutive year, highlighting sustained investor confidence and a resilient domestic economy.