Domestic Firms Set to Dominate Indian Office Space Market by 2025

Domestic firms expected to lease 65 million-sq-feet in significant shift for Indian office market

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 States, mentioned CBRE. Domestic firms saw a substantial 60% increase in office space absorption in the last two years, compared to the pre-pandemic years of 2018-2019. These firms have accounted for nearly 47% of overall office leasing activity in the last decade, with Delhi-NCR leading the way, followed by Bengaluru and Mumbai. According to the report, 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", said Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE. Some of the firms that has expanded recently includes L&T technology services leasing 5, 45,000 sq ft in Bengaluru, LTI Mindtree leasing 1.2 mn sqft in Bengaluru and Chennai, Smartworks leasing 7, 00,000 sqft in Bengaluru and IDFC leasing 500,000 sqft in Mumbai. The growth in India's office market is supported by various factors 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. 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's top nine cities are poised to see an addition of 185 million sq. ft. of premium office space by 2026. This increase in office space is a testament to several key factors driving the transformation of the commercial real estate landscape", said Magazine. 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, CBRE. The demand for office space is expected to remain robust, driven primarily by the BFSI, technology, and flexible space sectors. "With Indian firms projected to undergo substantial expansions, the demand for office space is likely to increase substantially. Technological advancements, especially in the field of AI, are anticipated to play a significant role in further enhancing this demand," said Ritesh Sachdev, senior vice president of Tata Realty and Infrastructure Ltd. According to experts, growth in domestic industry expansion, advances in technology, especially artificial intelligence (AI), are poised to further transform the office sector. Additionally, digitalization, evolving workplace strategies, and enhanced business confidence, is expected to further boost leasing activity. The Indian office market has witnessed a robust absorption with office leasing across nine major cities in India reaching 32.8 million sq ft during the period of January to June 2024, marking a 14% year-on-year increase and the second-highest H1 leasing.

India's office market sees shift as domestic firms eye 65 million sq ft between 2024-2025

The Indian office market is witnessing a shift, with domestic companies expected to lease 60-65 million square feet of office space between 2024-2025. This trend marks a departure from the historical dominance of global corporations. Key sectors driving this demand include BFSI, technology, and flexible space operators.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 States During 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.

Domestic firms to lease 60-65 million sq ft office space by 2025: CBRE report

Domestic companies have been responsible for nearly 47 per cent of office leasing activity from 2022 to H1 2024, marking a departure from the traditional dominance of global corporations, particularly American firms. During 2022-2023, domestic firms experienced a 60 per cent surge in office space absorption compared to the pre-pandemic period of 2018-2019. Key occupier groups have secured significant spaces in prime locations across major cities, with Delhi-NCR leading, followed by Bengaluru and Mumbai. E-commerce and life sciences companies have driven occupancy in Bengaluru and Hyderabad, respectively, while Mumbai has captured a substantial 43 per cent share of domestic BFSI leasing, with strong contributions from Delhi-NCR and Chennai. The report attributes the robust growth of India's office market to several factors, including government initiatives like Make in India and the Production Linked Incentive (PLI) Scheme. These programs, along with increased domestic manufacturing, employment generation, and a well-capitalized banking sector, have created a supportive environment for business expansion. Other contributing factors include low corporate leverage ratios and improved access to capital, which have enhanced the investment capacity of Indian companies. India's talent pool, with approximately 2.5 million STEM graduates and a thriving start-up ecosystem featuring over 100 unicorns, has also been a major driver of growth. With over 38 sector skill councils, the government's focus on bridging the skill gap is preparing domestic firms for future demands, further bolstering the office leasing sector. Flexible space operators, technology, and BFSI sectors have emerged as the primary drivers of office leasing, collectively accounting for two-thirds of all domestic activity. The RCA sector, which includes legal, taxation, HR, and media services, is also playing a significant role in boosting domestic leasing. Additionally, Indian engineering and manufacturing firms, which currently represent 7-8 per cent of domestic office leasing, are expected to expand into Tier-II and Tier-III cities, which are emerging as manufacturing hubs. Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, "India's rapidly expanding start-up ecosystem and talent abundance are major drivers of this demand. 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. He added, "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 and Transaction Services, CBRE India, said, "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." (ANI)