New office supply hit an all-time high in 2024 across seven major cities at 515 lakh sq ft: Vestian
Vestian’s office market report stated that 2024 has been challenging for the Indian office market due to global macroeconomic uncertainty, escalating geopolitical frictions, and sticky inflation. Despite these challenges, India’s office market reported the highest-ever supply in any year.
A surge in demand for grade-A office spaces kept developers active throughout the year. Construction activities increased by 7% compared to the previous year, reaching 515 lakh square feet, marking the highest supply ever recorded. Among the top seven cities, the maximum fresh supply was seen in Hyderabad followed by Bengaluru.
With robust absorption and supply in 2024, vacancy rates improved slightly, decreasing from 13.98% in 2023 to 13.91% in 2024. Additionally, rental prices increased by 3.8% to 8.2% across the top seven cities.
Since the pandemic, office space absorption has gradually increased each year, despite global headwinds. In 2024, the absorption reached an all-time high of 707 lakh square feet, reflecting a 16% annual increase. All cities except the National Capital Region (NCR) and Kolkata reported their highest-ever absorption levels during 2024. Absorption in Kolkata and NCR saw annual declines of 36% and 14%, respectively.
Source: Vestian Research
Shrinivas Rao, FRICS, CEO, Vestian said, “IT-ITeS sector continued to dominate leasing activities during 2024 with 36% share. The share has increased from 24% a year earlier. While IT industry is expected to lead in 2025 on the back of strong demand from GCCs, other segments such as BFSI and Flex Spaces are also anticipated to garner traction.”
Rao further added, “Emphasis on sustainability has grown among occupiers as several multinational companies with offices in India have pledged to achieve net-zero emissions, leading to a rise in demand for green-certified office spaces in India. Anticipating this shift, leading developers are prioritizing the construction of sustainable office buildings.”
City-wise Analysis
* Bengaluru dominated the absorption with 177 lakh sq ft in 2024, registering an increase of 15% over the previous year. However, the share remained stable at 25% compared to last year.
* The share of Mumbai in pan-India absorption increased from 14% in 2023 to 18% in 2024 whereas the share of NCR declined from 17% to 13% during the same period. The share remained largely stable for the rest of the cities.
* Southern cities (Bengaluru, Chennai, and Hyderabad) accounted for 57% of the pan-India absorption in 2024. The share marginally increased from 56% in 2023.
* Hyderabad reported the highest new completions of 145 lakh sq ft in 2024, closely followed by Bengaluru with 140 lakh sq ft. Interestingly, Kolkata witnessed no new completions during 2024 as compared to over 10 lakh sq ft of supply in the previous year.
* New completions increased by 170% in Mumbai, the highest amongst the top seven cities. Conversely, new completions were reduced by 57% in Chennai during 2024.
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