Chennai continued its strong showing, following up from the momentum witnessed in 2023, contributing to a significant 17.6% share of the overall leasing. Mumbai and Pune followed with gross leasing figures of 2.11 million sq. ft and 1.81 million sq. ft, respectively, the report said.

Net absorption up 10.9% Y-o-Y

India’s net absorption across the top seven cities, stood at 8.30 mn sq ft, up by 10.9% y-o-y. This first quarter performance is second only to Q1 2022 among all Q1 numbers since 2020, signifying the consistent headcount growth-driven expansion activity by corporates in India, the report said.

The net absorption during the quarter was led by Delhi NCR with a 27.3% share, followed by Bengaluru with 20.8%, Hyderabad with 18.7% and Mumbai with 18.1% shares, respectively. 

The first quarter net absorption for the cities of Delhi NCR, Mumbai and Chennai were also all at post-COVID highs compared to previous Q1 numbers, symptomatic of expansion-led demand on track to near historic highs in the India office market.

Gross leasing refers to all lease transactions recorded during the period, including confirmed pre-commitments, but does not include term renewals. Deals in the discussion stage are not included.

Net absorption is calculated as the new floor space occupied less floor space vacated. Floor space that is pre-committed is not considered to be absorbed until it is physically occupied.

Domestic occupiers march ahead led by BFSI and flex

The first quarter of 2024 belonged to the domestic occupiers, particularly in the BFSI, flex, and manufacturing/engineering segments as they gained a majority share in office leasing.

“India's office ecosystem is a blend of “office to the world” and strong domestic sector growth. While global corporations remain strong takers of office space in India, their sluggish decision-making has seen the strong domestic economy pick up the slack,” said Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.

“In Q1 2024, domestic occupiers intensified their demand, contributing approximately 53% to the gross leasing activity. This remains in line with the trend being observed over the past two years where domestic occupiers have consistently gone toe to toe with their global counterparts in space acquisition. Moreover, this highlights the resilience and adaptability of India's office market,” he said.

Tech sector continues to remain sluggish

Flex and manufacturing/engineering sectors maintain a strong bullish outlook on their growth trajectory, while the tech industry continues to grapple with the challenge of sluggishness, the report said. 

Space take-up by third-party outsourcing firms, given global headwinds and slower revenue growth continues to impact the tech sector, with its share of gross leasing at 24.2%, mostly range-bound compared to the previous year. Flex space operators continue to play a significant role in India’s office markets, accounting for 21.0% of the gross leasing in Q1 2024, the highest space take up ever for this segment post Covid, the report said. 

“India's office market has consistently demonstrated unparalleled resilience and growth in the face of global sluggishness and has benefitted from its strong underlying fundamentals that support the sustained growth in demand. Over the next 3 to 4 years, we expect the market activity levels of over 60 million sq. ft witnessed in 2019 and 2023 to become the new normal, with gross leasing levels aligning more closely with the range observed during those years,” said Rahul Arora, Head, Office Leasing & Retail Services, India, JLL.

"In 2024, the pace of corporate space take-up is anticipated to significantly accelerate in the latter half of the year, following the general elections and gross leasing is estimated to potentially surpass the 63 million sq. ft recorded just last year,” said Arora.

Outlook: Market activity primed to surpass 2023 peak levels

This positive trajectory will be primarily driven by the entry of new Global Capability Centers (GCCs) into the country, as well as the expansion of operations for existing GCCs across all key and emerging technology segments. 

The country's favorable manufacturing policies are predicted to attract even more strongly high-end research and development (R&D) work, further stimulating demand in the office market.

The momentum of flex space operators amidst a likely revival in tech outsourcing as global market conditions improve are also expected to play a key role in taking India’s office market to greater heights in 2024 and beyond, the report said.