During the first half of FY 2024, the commercial office space experienced sluggish growth with a 5 per cent increase in new office supply across the top 7 cities compared to H1 FY23, states a report by Anarock. Additionally, the net office absorption dropped by 1 per cent y-o-y.
Grade A office rental values averaged ₹83 per sq. ft. per month, showing an increase from approximately ₹77.5 per sq. ft. in H1 FY23, according to Prashant Thakur, Regional Director & Head – Research, Anarock Group.
Chennai led with a notable 10 per cent annual increase in average monthly office rental values, reaching around ₹68 per sq. ft. in H1 FY2023. Hyderabad followed closely with an 8 per cent yearly growth, rising from ₹61 per sq. ft. in H1 FY2023 to about ₹66 per sq. ft. in H1 FY 2024. Bengaluru, Pune, and Kolkata each witnessed a 7 per cent annual growth, while MMR and NCR registered a 5 per cent increase.
Despite global corporate layoffs and reduced business volumes, office activity remained largely stable in the first half of FY 2024. New completions saw a modest 5 per cent yearly increase, and net absorption dropped by just 1 per cent. IT/ITeS continued to dominate leasing transactions in H1 FY2024 but saw a decline in overall leasing share from 46 per cent in H1 FY2020 to 29 per cent in H1 FY2024. Coworking spaces, on the other hand, saw an increase in share from 11 per cent to 24 per cent.
With increased office space completions, vacancy levels rose marginally across most top cities, except in NCR, MMR, and Kolkata. The average vacancy rate of Grade-A offices in the top 7 cities collectively increased by 0.95 per cent, reaching 16.85 per cent in H1 FY24. Pune had the lowest annual average vacancy rate at 8.3 per cent, while NCR, MMR, and Kolkata witnessed a year-on-year reduction in vacancy levels.
In terms of variations, Pune, Bengaluru, and Hyderabad experienced increases in office space vacancy levels over the financial year.
Despite short-term challenges, the mid-to-long-term outlook for Indian commercial office space remains positive, especially with Grade A offices available at sub-dollar rents. Stability in the office market is anticipated to return from the second half of 2024, noted the report.