Office rentals in India doing better than the pre-pandemic days

In a remarkable change of trends it has been noticed that of late office rentals in India are mostly northward. This also perhaps stems from the fact that such tenants are no longer budget restricted in that they don’t mind paying more as rentals as long as they are assured of office space that signifies superior quality, despite the fact that office occupiers are still cost-conscious. It is therefore little wonder that India's top office markets too have experienced a significant four to eight per cent YoY surge in rentals, driven by robust demand and simultaneous infusion of high-end, quality supply. Ironically, this trend is not unique to India per se as occupiers across the Asia Pacific region are willing to pay higher rentals for superior quality offices, particularly in locations that facilitate talent acquisition, if one goes by Colliers’ latest edition of ‘Expert Insights- Asia Pacific Office Markets’.

One should not forget that India’s office market had witnessed a dip during the pandemic years owing to multiple reasons, especially subdued demand, occupier exits and remote work trends. However, in a remarkable turnaround, rentals have seen a considerable growth in 2024, surpassing even pre-pandemic levels. Strong office market performance in India can be attributed to robust economic growth and renewed occupier confidence.

A deeper look into the recent market trends shows that select high performing markets across the top six cities have specifically seen up to 20 per cent YoY rental rise. This surge in rental prices, according to experts, reflects the growing preference of occupiers, who are willing to pay a premium for buildings replete with state-of-the-art amenities and are adorned with green certifications across strategic locations. Owing to superior quality construction and high-end amenities, quoted rents of the new office supply are typically up to 20 per cent higher compared to the average rentals across select premium micro markets, which have seen a gradual rise. Office occupiers in the country, on their part, are tweaking their strategies accordingly. In response to evolving market dynamics, office occupiers in India are revolutionizing their cost optimization strategies, by embracing hub-and-spoke model, expanding flex space portfolios and leveraging technology.

Suburban and peripheral areas, offering affordability, are witnessing heightened demand, indicating a preference for the sub-dollar or near-dollar markets. Flex spaces, especially with the rise of core-plus-flex models, are gaining prominence. And these are perfectly understandable. Taken as a whole, these are helping India's ascendance as a premier GCC (global capability centre) hub in the APAC region, which, in turn, underscores its unmatched value proposition for global corporates. It is presumed by observers and market watchers that in the next the years, the projected leasing of 45-50 million square feet of office space by GCCs is poised to further solidify India's position, driving over 40 per cent of the country's office leasing activity. It would not be a wrong notion to expect that with global corporates increasingly seeking to optimize resources, maximize savings and drive growth, India will offer a compelling proposition, going forward.