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The Indian office market is experiencing a notable shift, with domestic companies projected to lease 60-65 million square feet of office space between 2024-2025, a significant departure from the historical dominance of global corporations, particularly those from the United StatesDuring 2022-2023, domestic firms witnessed a significant 60% increase in office space absorption compared to the two pre-pandemic years of 2018-2019. These firms account for nearly 47% of overall office leasing activity from 2022 to H1-2024, as mentioned in a report by CBRE. The report mentioned that major occupiers acquired substantial spaces in prime locations across key cities, with Delhi-NCR leading, followed by Bengaluru and Mumbai. Cities like Bengaluru and Hyderabad saw increased occupancy by e-commerce and life sciences firms, respectively, reflecting their strong growth trajectories. Further, Mumbai emerged prominently with a 43% share of domestic BFSI leasing, bolstered by substantial contributions from Delhi-NCR and Chennai during 2018 – H1 2024. Additionally, domestic technology firms have been expanding their office footprints to meet the rising demand for tech-driven solutions.“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”, said Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE.The growth in India’s office market is supported by various factors, including government initiatives like the Make in India program and the Production Linked Incentive (PLI) Scheme, increased profitability and a well-capitalized banking sector. Proactive steps taken to scale domestic manufacturing capability, accompanied by higher import substitution and employment generation,are fostering a thriving & sustainable business environment. Besides, low corporate leverage ratios and improved access to capital are enabling substantial expansion in investment capacity, providing a launchpad for Indian companies to expand. Additionally, a talent pool of approximately 2.5 million STEM graduates and a burgeoning start-up ecosystem featuring over 100 unicorns and more than 100,000 start-ups is further fueling the growth. With over 38 sector skill councils, the government’s strong focus on bridging the skill gap is further encouraging the domestic capacity in terms of future readiness, which is a major indicator for the growth of domestic firms and the office sector. “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,” said Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India.In recent years, the office leasing landscape in India has been predominantly driven by three key sectors: flexible space operators, BFSI (banking, financial services, and insurance), and technology firms, which have collectively accounted for two-thirds of all domestic office leasing activity. This trend is expected to persist as these sectors continue to drive significant demand for office space. The RCA (research, consulting and analytics) sector with services spanning across legal, taxation, HR, media among others is also driving domestic leasing. Meanwhile, Indian engineering and manufacturing firms, which currently represent 7-8% of domestic office leasing, are anticipated to expand their footprint, including into Tier-II and Tier-III cities that are emerging as new manufacturing hubs. Similarly, homegrown retail and FMCG companies, currently accounting for 1-2% of domestic office leasing, are expected to increase their office space requirements as they expand operations and scale their workforce to support long-term growth strategies.As sectors like BFSI, technology, and flexible space operators continue to dominate, and with projections indicating substantial expansions by Indian firms, the demand for office space is set to remain strong. Advances in technology, particularly AI, are expected to further drive this demand, offering challenges and opportunities for the workforce and real estate markets. Indian IT majors are anticipated to expand their workforce and engage in mergers and acquisitions starting in late 2024. This strategic growth is expected to be driven by a focus on innovation as these companies seek to enhance their technological capabilities and market presence. Moreover, emerging technologies are projected to generate approximately 4.7 million tech jobs over the next five years across diverse sectors, including manufacturing, retail, education, finance, and insurance. This surge in job creation underscores the growing importance of technology across industries and highlights the need for a skilled workforce to meet the evolving demands of the digital economy.
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