Domestic Firms Lead Office Leasing Market in India: CBRE Report

New Delhi / September 13, 2024: A transformative shift is underway in India’s office leasing market, as domestic firms emerge as the primary drivers of demand, according to a new report by CBRE South Asia Pvt. Ltd. The report, titled “India Inc’s Ascension – The Rise of Domestic Firms as an Office Demand Driver,” reveals that domestic companies have accounted for nearly 47% of total office leasing activity from 2022 through the first half of 2024. This marks a significant shift from the previously dominant global corporations, particularly American firms.

The report forecasts that domestic firms will lease between 60-65 million square feet of office space between 2024 and 2025. This surge is attributed to a 60% increase in office space absorption by domestic firms during 2022-2023 compared to the pre-pandemic years of 2018-2019. Major Indian cities, especially Delhi-NCR, Bengaluru, and Mumbai, have seen substantial acquisitions in prime locations, with sectors such as e-commerce and life sciences showing significant growth.

The rise in office space leasing is supported by several factors. Government initiatives like the Make in India program and the Production Linked Incentive (PLI) Scheme, combined with increased profitability and a well-capitalized banking sector, have created a thriving and sustainable business environment. The expanding talent pool of approximately 2.5 million STEM graduates and the burgeoning start-up ecosystem, which includes over 100 unicorns and more than 100,000 start-ups, are further fueling this growth.

Flexible space operators, BFSI (banking, financial services, and insurance), and technology firms are the primary sectors driving office leasing, collectively accounting for two-thirds of domestic leasing activity. The report highlights that flexible space stock is expected to reach 80 million square feet by 2024, with about 57% of domestic firms planning to utilize flexible spaces in the next two years.

Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “Domestic firms are demonstrating a strong commitment to growth and expansion, which is set to drive substantial office space absorption in the coming years. India’s rapidly expanding start-up ecosystem and talent abundance are major drivers of this demand. This surge in office space leasing by Indian firms reflects a broader trend towards high-quality, adaptable work environments that cater to the evolving needs of businesses. 

As India’s major urban centers continue to grow and diversify, the demand for premium office spaces will shape the future of the commercial real estate market, setting new standards for innovation and excellence. India’s top nine cities are poised to see an impressive addition of ~185 million sq. ft. of premium office space by 2026. This dramatic increase in office space is a testament to several key factors driving the transformation of the commercial real estate landscape”.

Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India, said, “India is on track to significantly expand its office space across top cities over the next three years. This growth is driving broader industry expansion and increasing demand for real estate leasing. Advances in technology, especially artificial intelligence (AI), are poised to further transform the office sector. While AI may cause job displacement in some areas, it will also create new opportunities and necessitate comprehensive workforce reskilling. The surge in workforce needs, driven by digitalization, evolving workplace strategies, and enhanced business confidence, has substantially boosted leasing activity.”

Looking ahead, India’s top nine cities are projected to see an addition of approximately 185 million square feet of premium office space by 2026. This growth reflects a broader trend towards high-quality, adaptable work environments and underscores the evolving needs of businesses in the country. As Indian IT majors expand their workforce and engage in mergers and acquisitions starting in late 2024, the demand for office space is expected to remain strong, driven by innovation and technological advancements.