The current spike in commercial real estate rents in Delhi-NCR is indicative of a versatile and lively market influenced by a range of factors, including economic growth, urbanization, demographic trends, and evolving business dynamics.
Reflecting a general trend in the Asia-Pacific, India’s top office markets have experienced a notable 4-8 percent year-on-year surge in rentals, driven by robust demand and simultaneous infusion of high-end, quality supply, real estate consultancy Colliers has said in a report.
After witnessing a dip during the pandemic years on account of subdued demand, occupier exits and remote work trends, rentals have seen a considerable growth so far in 2024, surpassing pre-pandemic levels. Strong office market performance in India has been fuelled by healthy economic growth and renewed occupier confidence.
Commenting on the same, Ashish Sharma, AVP Operations, Brahma Group, says, “Delhi-NCR has witnessed an annual increase in workplace rent with an 8% surge in the last 3 months according to a recent report by Colliers. Furthermore, the reports indicate that high-quality office spaces are in high demand with yearly cost hikes up to 20%. Besides, businesses are still willing to pay more for these premium locations, depicting a positive shift in India’s office market. As a result, Delhi-NCR stands out as a front-runner, driven by India’s overall strong economic performance and evolving business, attracting both investors and buyers alike.”
The nation’s top commercial real estate markets experienced an 8 percent year-on-year rise in rentals in the January-March period, with Delhi-NCR leading the pack.
The Colliers report said that weighted average quoted (WAQ) rents in Delhi-NCR rose to Rs 101.5 per square feet a month in the first quarter of 2024 from Rs 93.3 in the year-ago period. The growth of 8.8 percent is the highest among the top six cities —Mumbai, Bengaluru, Hyderabad, Chennai, Pune, and Delhi-NCR.
A detailed analysis of the factors contributing to the surge in commercial real estate rents in Delhi-NCR can reveal some instructive insights into the trend.
Delhi-NCR has been a key economic hub in India, experiencing robust growth led by sectors such as information technology, finance, manufacturing, and services. As businesses expand and new enterprises emerge, the demand for commercial spaces, particularly office spaces, has surged, leading to upward pressure on rents.
Urbanization and population growth in Delhi-NCR have fuelled demand for commercial real estate, including office spaces, retail outlets, and industrial facilities. As more people move to urban areas for employment and business opportunities, the need for commercial spaces has intensified, driving rents higher, especially in prime locations.
Prime commercial spaces in central business districts and established commercial hubs like Connaught Place, Gurgaon’s Cyber City, and Noida’s Sector 18 are in high demand but with limited supply. Moreover, the scarcity of quality commercial spaces in these areas has led to bidding wars among tenants, pushing rents to record highs.
Infrastructure development initiatives, such as metro rail expansion, highway projects, and commercial corridor development, have enhanced connectivity and accessibility to commercial areas in Delhi-NCR. Improved infrastructure attracts businesses, investors, and consumers, boosting demand for commercial real estate and driving up rents.
Delhi-NCR has also been a favoured destination for foreign investors seeking a base in India’s growing economy. The influx of foreign investment has bolstered business activity, corporate expansions, and demand for premium office spaces in key business districts, contributing to the surge in commercial real estate rents.
Dr. Renu Singh, Director – Sales & Marketing, Aarize Group, said, Rents of commercial real estate in Delhi-NCR have increased substantially on strong demand and limited supply of good quality office spaces. A 8.8 percent YoY increase underlines growing attractiveness and strategic importance of this region. The development, coupled with increasing significance of flex spaces and GCCs make Delhi – NCR an even more compelling destination for major corporations as well as investors; this dynamic evolution of this market only serves to reaffirm our commitment towards the creation of premium office spaces that intend to satisfy the increasing demand.
The rise of co-working spaces has also catalysed the commercial real estate market in Delhi-NCR, catering to startups, freelancers, and small businesses seeking flexible and affordable office solutions, further powering the overall surge in commercial real estate rents.
Despite ongoing developments and new commercial projects in Delhi-NCR, there remains a supply-demand imbalance, particularly in prime locations. The gap between supply and demand has exerted upward pressure on rents, making it a landlord’s market in many areas.
As the region continues to generate investment and business activity, office rents are likely to remain on an upward curve, though with intermittent fluctuations triggered by market dynamics and external influences.