Indian Office Market Witnesses Supply Despite Challenges

04 Mar 2025 CW Team

The surge in demand for Grade-A office spaces kept developers engaged throughout the year. Construction activity increased by 7% compared to 2023, reaching an unprecedented 515 lakh square feet of new supply. Among the top seven cities, Hyderabad led the fresh supply, closely followed by Bengaluru, reaffirming the dominance of southern cities in India’s office market.

With strong absorption and robust supply in 2024, vacancy rates witnessed a marginal improvement, decreasing from 13.98% in 2023 to 13.91% in 2024. Additionally, rental prices saw an uptick, increasing by 3.8% to 8.2% across major markets.

Despite ongoing global economic uncertainties, office space absorption has shown consistent growth since the pandemic. In 2024, office space absorption reached an all-time high of 707 lakh square feet, marking a 16% annual increase. All major cities, except Kolkata and the National Capital Region (NCR), reported their highest-ever absorption levels. While Kolkata and NCR saw declines of 36% and 14%, respectively, Mumbai recorded the highest year-on-year absorption growth at 50%, signalling increased demand in the financial capital.

Vestian’s report further reveals that the IT-ITeS sector remained the primary driver of leasing activities in 2024, with its share rising from 24% in 2023 to 36% in 2024. According to Shrinivas Rao, FRICS, CEO, Vestian, the IT sector is expected to maintain its leadership in 2025, supported by strong demand from Global Capability Centres (GCCs). Meanwhile, other segments such as Banking, Financial Services & Insurance (BFSI) and Flex Spaces are also poised for growth.

Sustainability has emerged as a major consideration among corporate occupiers, with multinational companies increasingly committing to net-zero emissions. This has led to a surge in demand for green-certified office spaces. Rao noted that developers are aligning their strategies with this trend, prioritising the construction of sustainable, energy-efficient office buildings to cater to evolving market demands.

City-Wise Office Market Performance in 2024 Bengaluru dominated the market with 177 lakh square feet of absorption, a 15% rise from the previous year, while maintaining a 25% share of total absorption. Mumbai’s share in total absorption grew from 14% in 2023 to 18% in 2024, whereas NCR’s share dropped from 17% to 13%. Other markets saw relatively stable shares. Southern cities—Bengaluru, Chennai, and Hyderabad—accounted for 57% of total absorption in 2024, up from 56% in 2023. Hyderabad recorded the highest new office completions at 145 lakh square feet, followed by Bengaluru at 140 lakh square feet. Kolkata had no new completions in 2024, a stark contrast to the 10 lakh square feet supply in 2023. Mumbai led the surge in new completions with a 170% increase, the highest among the top seven cities, whereas Chennai saw a 57% drop in new supply.

Market Outlook for 2025 As India’s economy continues to expand, the office market is expected to maintain its growth trajectory in 2025. Demand for Grade-A office spaces, sustainable buildings, and flex workspaces is likely to remain robust. The IT-ITeS sector will continue to lead leasing activity, while BFSI and co-working operators are expected to expand further. Developers will focus on green-certified office buildings as sustainability becomes a key differentiator. With strong fundamentals, rising demand, and improving market conditions, India’s office market is well-positioned for continued growth in the year ahead.

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Vestian’s latest Office Market Report 2025 highlights that 2024 was a challenging year for the Indian office market, with global macroeconomic uncertainty, escalating geopolitical tensions, and persistent inflation creating headwinds. However, despite these adversities, India recorded the highest-ever annual office space supply, reflecting strong resilience in the sector. The surge in demand for Grade-A office spaces kept developers engaged throughout the year. Construction activity increased by 7% compared to 2023, reaching an unprecedented 515 lakh square feet of new supply. Among the top seven cities, Hyderabad led the fresh supply, closely followed by Bengaluru, reaffirming the dominance of southern cities in India’s office market. With strong absorption and robust supply in 2024, vacancy rates witnessed a marginal improvement, decreasing from 13.98% in 2023 to 13.91% in 2024. Additionally, rental prices saw an uptick, increasing by 3.8% to 8.2% across major markets. Despite ongoing global economic uncertainties, office space absorption has shown consistent growth since the pandemic. In 2024, office space absorption reached an all-time high of 707 lakh square feet, marking a 16% annual increase. All major cities, except Kolkata and the National Capital Region (NCR), reported their highest-ever absorption levels. While Kolkata and NCR saw declines of 36% and 14%, respectively, Mumbai recorded the highest year-on-year absorption growth at 50%, signalling increased demand in the financial capital. Vestian’s report further reveals that the IT-ITeS sector remained the primary driver of leasing activities in 2024, with its share rising from 24% in 2023 to 36% in 2024. According to Shrinivas Rao, FRICS, CEO, Vestian, the IT sector is expected to maintain its leadership in 2025, supported by strong demand from Global Capability Centres (GCCs). Meanwhile, other segments such as Banking, Financial Services & Insurance (BFSI) and Flex Spaces are also poised for growth. Sustainability has emerged as a major consideration among corporate occupiers, with multinational companies increasingly committing to net-zero emissions. This has led to a surge in demand for green-certified office spaces. Rao noted that developers are aligning their strategies with this trend, prioritising the construction of sustainable, energy-efficient office buildings to cater to evolving market demands. City-Wise Office Market Performance in 2024 Bengaluru dominated the market with 177 lakh square feet of absorption, a 15% rise from the previous year, while maintaining a 25% share of total absorption. Mumbai’s share in total absorption grew from 14% in 2023 to 18% in 2024, whereas NCR’s share dropped from 17% to 13%. Other markets saw relatively stable shares. Southern cities—Bengaluru, Chennai, and Hyderabad—accounted for 57% of total absorption in 2024, up from 56% in 2023. Hyderabad recorded the highest new office completions at 145 lakh square feet, followed by Bengaluru at 140 lakh square feet. Kolkata had no new completions in 2024, a stark contrast to the 10 lakh square feet supply in 2023. Mumbai led the surge in new completions with a 170% increase, the highest among the top seven cities, whereas Chennai saw a 57% drop in new supply. Market Outlook for 2025 As India’s economy continues to expand, the office market is expected to maintain its growth trajectory in 2025. Demand for Grade-A office spaces, sustainable buildings, and flex workspaces is likely to remain robust. The IT-ITeS sector will continue to lead leasing activity, while BFSI and co-working operators are expected to expand further. Developers will focus on green-certified office buildings as sustainability becomes a key differentiator. With strong fundamentals, rising demand, and improving market conditions, India’s office market is well-positioned for continued growth in the year ahead.

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