Grade A office space in top six cities seen at 1 billion square feet by 2030

High quality office space in India’s top six cities is seen touching 1 billion square feet by 2030, having already crossed the milestone of 700 million square feet (msf) in the first quarter of 2023, an industry report said.

In a joint report, CREDAI and CRE Matrix said low monthly lease rentals of less than or close to $1, competitive wage levels and a still strong tech talent pool were drivers for more office space being taken up, with co-working spaces also contributing to it.

The report said global headwinds such as the slowdown in the US and Europe, had paused short-term expansion plans, but demand in the March quarter matched supply. An indicator of the demand resilience was market rents that have risen 5 per cent sequentially to Rs 92 per square feet.

“This not only is a re-affirmation of return-to-office policies, but also indicates how the big three pillars – IT/ITeS, BFSI and co-working segments – are fuelling demand via expansion,” it said.

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Leasing in 2023 is seen at 45 msf, driven by Bengaluru and the Mumbai Metropolitan Region. The report said demand outstripped supply in Bengaluru by 1.6 times and 2.1 times in MMR. “The cities are currently witnessing higher demand versus new supply, leading to a decrease in vacancies. This trend is expected to persist in the near future.”

Across the top six cities, demand in the first quarter was 8.6 msf, while supply was slightly ahead at 8.7 msf. Over the next couple of years supply of 196.8 msf would come up. Vacancy was currently at 16.7 per cent.    

Co-working inventory at 50 msf contributed around 7 per cent to overall office space. Co-working made a significant contribution of 10 per cent to the demand for office space in the March quarter.

While Bengaluru and MMR contributed over half to Q1 demand, the National Capital Region and Pune combined contributed over half of the supply. On an individual basis, Bengaluru contributed about a third to demand, while NCR contributed about a third to supply of office space.

In terms of vacancies, NCR saw the highest vacancy at 24.8 per cent, while Bengaluru was the lowest at 7.2 per cent.