Record-Breaking Growth in India's Office Leasing Market

In a remarkable turn of events, India's office leasing market has set new records in 2023, with noteworthy developments in the Mumbai metropolitan region (MMR) and other major cities, according to a recent research report by international real estate advisory firm Savills India.

Mumbai Leads the Way with Unprecedented Surge

The Mumbai office leasing market emerged as the star performer, surging to an all-time high of 10.1 million square feet (sqft) in 2023, marking a staggering 51% increase from the previous year. Mumbai's meteoric rise was particularly significant, with leasing activity soaring from 6.7 million sqft in 2022 to an unprecedented 10.1 million sqft in 2023. Savills India's report revealed that this growth can be attributed to a combination of factors, including the absorption of pre-committed spaces from prior to 2023 and the uptake of spaces in buildings completed in 2022 and 2023. Notably, micro markets like central Mumbai and the western suburbs, including areas like Malad, played a pivotal role in this surge.

National Trends and Sector-wise Insights

A report in Hindustan Times mentioned that India's top six cities, including Mumbai, collectively witnessed a new record in office leasing activity, totaling a remarkable 62.3 million sqft in 2023. This represents a substantial 12% increase from the previous year, reflecting the overall strength of the market. Apart from Mumbai, other cities also experienced impressive growth. Hyderabad saw a notable year-on-year increase of 34%, with leased office space expanding from 6.4 million sqft to 8.6 million sqft. Chennai, too, demonstrated robust growth, with a 32% increase, taking leased office space from 7.3 million sqft to 9.6 million sqft.

In the MMR, the banking, financial services, and insurance (BFSI) sector, as well as the engineering and manufacturing sector, continued to drive demand. These sectors accounted for 47% and 9% of leased office space, respectively. BFSI occupiers focused their leasing activities in micro markets like western suburbs II (beyond Andheri) and Navi Mumbai, with an impressive year-on-year increase of 85%. Meanwhile, leasing by engineering and manufacturing occupiers also surged, registering an 84% year-on-year increase.

Industry experts remain optimistic about the Indian office market's future and are highlighting the industry's reversal of the subdued demand trend observed until six months ago. Some have noted that India's gross absorption reached an all-time high at 62.3 million sqft in 2023, exceeding earlier forecasts and indicating a sustained recovery driven by robust economic growth and strong market fundamentals. Moreover, the office leasing market's remarkable performance in 2023 provides a positive outlook for both the industry and the broader economy, particularly as India approaches significant democratic elections in the coming year.