The Indian office market is experiencing a notable shift, with domestic companies projected to lease 60-65 million square feet of office space between 2024 and 2025, marking a significant departure from the historical dominance of global corporations, particularly those from the United States, according to a report by CBRE, a property consulting firm.
Domestic firms have seen a substantial 60% increase in office space absorption over the last two years compared to the pre-pandemic years of 2018-2019.
These firms have accounted for nearly 47% of overall office leasing activity in the last decade, with Delhi-NCR leading the way, followed by Bengaluru and Mumbai.
According to the report, cities like Bengaluru and Hyderabad have seen increased occupancy by e-commerce and life sciences firms, respectively, reflecting their strong growth trajectories.
Additionally, Mumbai has emerged prominently with a 43% share of domestic BFSI leasing, bolstered by substantial contributions from Delhi-NCR and Chennai during 2018 – H1 2024.
Domestic technology firms have also been expanding their office footprints to meet the rising demand for tech-driven solutions.
“Domestic firms are demonstrating a strong commitment to growth and expansion, which is set to drive substantial office space absorption in the coming years. India’s rapidly expanding start-up ecosystem and abundant talent are major drivers of this demand,” said Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE.
Some of the firms that have expanded recently include L&T Technology Services, leasing 545,000 sq ft in Bengaluru; LTI Mindtree, leasing 1.2 million sq ft in Bengaluru and Chennai; Smartworks, leasing 700,000 sq ft in Bengaluru; and IDFC, leasing 500,000 sq ft in Mumbai.
The growth in India’s office market is supported by various factors such as the Make in India program, the Production Linked Incentive (PLI) Scheme, increased profitability, and a well-capitalised banking sector.
Proactive steps to scale domestic manufacturing capability, accompanied by higher import substitution and employment generation, are fostering a thriving and sustainable business environment.
Additionally, a talent pool of approximately 2.5 million STEM graduates and a burgeoning start-up ecosystem featuring over 100 unicorns and more than 100,000 start-ups are further fuelling the growth. With over 38 sector skill councils, the government’s strong focus on bridging the skill gap is encouraging domestic capacity for future readiness, a major indicator for the growth of domestic firms and the office sector.
“India’s top nine cities are poised to see an addition of 185 million sq. ft. of premium office space by 2026. This increase in office space is a testament to several key factors driving the transformation of the commercial real estate landscape,” said Magazine.
In recent years, the office leasing landscape in India has been predominantly driven by three key sectors—flexible space operators, BFSI (banking, financial services, and insurance), and technology firms—which have collectively accounted for two-thirds of all domestic office leasing activity. This trend is expected to persist as these sectors continue to drive significant demand for office space.
The RCA (research, consulting, and analytics) sector, encompassing services such as legal, taxation, HR, and media, is also driving domestic leasing.
Meanwhile, Indian engineering and manufacturing firms, which currently represent 7-8% of domestic office leasing, are anticipated to expand their footprint, including into Tier-II and Tier-III cities emerging as new manufacturing hubs.
Similarly, homegrown retail and FMCG companies, currently accounting for 1-2% of domestic office leasing, are expected to increase their office space requirements as they expand operations and scale their workforce to support long-term growth strategies.
The demand for office space is expected to remain robust, driven primarily by the BFSI, technology, and flexible space sectors.
“With Indian firms projected to undergo substantial expansions, the demand for office space is likely to increase significantly. Technological advancements, especially in the field of AI, are anticipated to play a significant role in further enhancing this demand,” said Ritesh Sachdev, Senior Vice President of Tata Realty and Infrastructure Ltd.
According to experts, growth in domestic industry expansion and advances in technology, especially artificial intelligence (AI), are poised to further transform the office sector. Additionally, digitalization, evolving workplace strategies, and enhanced business confidence are expected to further boost leasing activity.
The Indian office market has witnessed robust absorption, with office leasing across nine major cities in India reaching 32.8 million sq ft during the period from January to June 2024, marking a 14% year-on-year increase and the second-highest H1 leasing on record.
