India’s office space market escalates despite slump in Bengaluru: Knight Frank Office Report
India’s office space market continues to escalate despite a slump in Bengaluru, the country’s largest IT hub, according to the Knight Frank Office Report. Office rents rose by 15 per cent in eight major cities last year, as reported by real estate consultancy Knight Frank India.
According to Knight Frank, demand for office space is projected to increase at a robust annual rate of 15%, reaching 59.6 million square meters by 2023. This growth in demand was primarily driven by Global Capability Centers (GCCs), which leased 20.8 million square feet of office space last year—an increase of 58% compared to 2022 levels.
Knight Frank added that total office leasing in 2023 was the second-best year ever, surpassing the levels seen in 2019 at 60.6 million square meters. Analyzing data for 2023, the report indicates significant increases in demand for office space across many major cities compared to previous years.
In Mumbai, office rent increased by 16% to 7.4 million square feet, while demand in Delhi-NCR surged impressively by 14% to 10.1 million square feet. Pune witnessed a 9% rise in rental activity, totalling 6.7 million square feet. A notable development occurred in Chennai, where demand for office space surged by 92% to 10.8 million square feet. Hyderabad also experienced strong growth, with office space demand increasing by 32% to 8.8 million square feet.
Even Kolkata, a relatively smaller market, observed a 20% annual growth in rents, reaching a total of 1.4 million square feet last year. However, office rentals in Bengaluru declined by 14 per cent to 12.5 million square feet. Similarly, Ahmedabad saw a 15% drop in demand, with rents totalling 1.8 million square meters.
Despite challenges in certain sectors, the overall performance of the Indian office space market has underscored its attractiveness to investors and businesses. As the economy continues to recover and business confidence increases, the outlook for the commercial space market remains positive, notwithstanding regional differences in citywide trends, practices, and operations.
Mr Amal Mishra, Co-founder, of Urban Vault, a Bengaluru-based managed co-working space provider mentioned The demand for Grade A office space and managed flexible office solutions is experiencing sustained growth, fueled by several factors, including the increasing interest from Global Capability Centers (GCC). Additionally, key sectors such as Banking, Financial Services, and Insurance (BFSI) and Information Technology (IT) continue to drive significant demand for Grade A office spaces. A notable trend within this growing demand is the preference among for managed co-working and flexy space. This choice allows companies to minimize their capital expenditures while benefiting from efficient management and reduced operational hassles. Moreover, the flexibility to scale up operations as needed makes managed flex-office solutions an attractive option for businesses adapting to dynamic market conditions. The surge in demand for these office solutions is particularly strong in cities like Bengaluru and Hyderabad.”