Office space leasing transactions in India's top eight cities including Bengaluru and Mumbai, driven by high demand from global and local companies, rose 15% year-on-year in 2023, the highest since 2019, an industry report said on Wednesday.
Office space transactions, an indicator of corporate sentiment, touched 59.6 million square feet, marginally lower than a record 60.6 million square feet achieved before the pandemic in 2019, a report by a real estate consultancy Knight Frank said.
The world's major accounting firms and manufacturers are stepping up investments in new Indian facilities as global demand for cheaper back-office operations grows.
Also, local manufacturing companies are buying office space as the economy is projected to grow around 6.5% next fiscal year after an estimated 7% year-on-year growth in the current fiscal year ending March.
"We anticipate the office market to reach new peaks in 2024," Shishir Baijal, CMD, Knight Frank India, told reporters, citing a surge in demand for flexible workspaces by domestic and foreign companies amid improving economic activities.
"The forthcoming year is poised for steady expansion, and 2024 promises to be a stand-out year for the office market, driven by India-facing businesses and GCCs," he said while releasing the bi-annual report on real estate.
Global Capability Centres, set up by multinational companies, recorded a 58% rise in leasing transaction volumes, taking nearly one-third of office space in 2023, the report said.
The southern Indian city of Chennai, the fast-emerging major hub for GCCs, reported a nearly two-fold rise in transactions for office space in 2023, while the software hub, Bengaluru reported 14% decline in office space leasing- reflecting a slowdown in demand from technology companies.
The growing demand for office space has led to higher rentals, rising by 4 to 11% in Mumbai and Kolkata, while rising by 1 to 2% year-on-year in Hyderabad and the national capital region, reflecting strong supplies by developers, the report added.
