In the third quarter of 2024, BFSI and Flex Spaces emerged as key demand drivers for office spaces. These sectors account for 39% of the pan-India absorption in Q3 2024, an increase of 20% from the previous quarter. Conversely, the share of IT-ITeS sector declined from 38% in Q2 2024 to 23% in the current quarter. This demand shift may alter the demand-supply dynamics across the country.
Q3 2024 recorded the highest quarterly absorption rate in 2024, totalling 18.61 million square feet amid heightened geopolitical tensions in the Middle East. Moreover, an increase of 17% over the previous year and 9% compared to the last quarter in absorption could be attributed to India’s robust GDP growth compared to other major economies of the world which lured several large MNCs to lease new office spaces or expand. Following the same trend, new completions also increased by 3% over the previous quarter, reaching 12.80 Mn sq ft in Q3 2024. However, construction activities have reduced by 4% compared to the corresponding quarter of last year.
Amid robust absorption and healthy supply, pan-India vacancy was reduced by 90 bps over the previous quarter, reaching 14.8% in Q3 2024. Despite a reduction in vacancies across the top cities, average rentals remained range-bound over the previous quarter.
Office Market Summary: Q3 2024
| City | Absorption (Mn sq ft) | Y-o-Y Change (%) | Q-o-Q Change (%) | New Completions (Mn sq ft) | Y-o-Y Change (%) | Q-o-Q Change (%) |
| Bengaluru | 6.63 | 84% | 56% | 3.60 | 33% | 3% |
| Chennai | 2.01 | NIL | 15% | 0.50 | -58% | -29% |
| Hyderabad | 2.79 | -25% | -18% | 4.10 | -25% | 41% |
| Mumbai | 2.25 | -2% | -34% | 0.90 | NIL | -73% |
| Kolkata | 0.11 | -45% | -52% | 0.00 | -100% | NA |
| Pune | 2.33 | 112% | -19% | 1.40 | -26% | 180% |
| NCR | 2.49 | -17% | 118% | 2.30 | 360% | 53% |
| Total | 18.61 | 17% | 9% | 12.80 | -4% | 3% |
Source: Vestian Research
City-wise Analysis
- Southern cities (Bengaluru, Chennai, and Hyderabad) accounted for 61% of the pan-India absorption in Q3 2024. The share has also increased from 55% in Q2 2024 which could be attributed to a significant increase in leasing activities across the major micro-markets of Bengaluru.
- Bengaluru’s share in absorption rose significantly from 25% in Q2 2024 to 36% in Q3 2024. On the other hand, the share of Mumbai reduced from 20% to 12% during the same period.
- Bengaluru continued to top the charts with 6.63 Mn sq ft absorption in Q3 2024 while Hyderabad followed with 2.79 Mn sq ft. Moreover, NCR witnessed the highest quarterly increase of 118% in terms of value owing to the sudden rise in office space take-up by flex spaces.
- All the cities except Mumbai and Chennai reported an uptick in construction activities during Q3 2024. New completions reduced by 73% in Mumbai whereas Chennai registered a decrease of 29% over the previous quarter.
- Hyderabad reported the highest new completions of 4.10 Mn sq ft in the past four quarters whereas construction activities remained muted in Kolkata during the same period stated above.
- Hyderabad dominated new completions with 32% share in Q3 2024, closely followed by Bengaluru at 28%. The share of Hyderabad increased from 23% in Q2 2024 while Bengaluru’s share remained stable.
- While average rentals remained stable in Kolkata during the current quarter, Bengaluru witnessed the highest appreciation of 1.1% over the previous quarter.
- Bengaluru and Pune have vacancies in single-digit, 8.2% and 7.2% respectively.
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