Construction Industry News
According to a report by CREDAI in collaboration with CRE Matrix, demand for rental of Grade A office space in India is expected to exceed 70 million square feet (MSF) this year. The report highlighted a significant increase in demand during the first quarter of 2024, reaching 16.7 MSF, an increase of 12% quarter-on-quarter and an increase of 14% year-on-year. Bengaluru, Mumbai Metropolitan Region (MMR) and National Capital Region (NCR) were the main drivers of this growth, accounting for nearly two-thirds of the total office demand. Together, these three cities saw a 23% increase in demand compared to the previous quarter.
Nationally, market rents in Grade A spaces continued to rise, close to Rs 100 per sq ft, by 8.7%. The increase increased quarter-on-quarter in the first quarter of fiscal 2024. The disparity between market and current rental rates widened to approximately 14%, indicating a strong landlord-focused market environment. Specifically, Bengaluru, Pune and Hyderabad saw an increase in rental prices during Q1FY24 compared to the previous quarter.
In addition, the report also highlighted the number of larger deals (>1 lakh sq.-) ft. Increased demand for offices. In Q1 FY2024, 56% of demand came from occupiers leasing more than a thousand square feet, a significant increase from 36% in Q4 FY2023 and 33% in Q1 FY2023. Bengaluru, Hyderabad and Noida accounted for Together 66%. Of these deals exceed 1 lakh sq ft.
With the return to office space, the IT/IT Services sector has emerged as the dominant force in leasing demand. , which represents about 28% of office space needs. At the same time, the BFSI sector saw an increase in its share of rental demand, rising from 16% in the first quarter of 2023 and 13% in the fourth quarter of the same year to 20% in the first quarter of 2024. Mumbai and Chennai alone contributed a percentage 50% of the demand is for the BFSI sector. In terms of the IT/IT services sector, while Bengaluru remained a major contributor with 35% of the sector's demand, Noida overtook Hyderabad, accounting for 20% of the demand in Q1 FY24. We are also seeing co-working spaces. Making a mark as an emerging asset class by contributing 10% to the demand for Grade A office space.
Boman Irani, Chairman, CREDAI, says: “With the confluence of strong economic fundamentals and significant investments enhancing both physical and digital infrastructure, we expect demand for Grade A offices across India to continue its momentum and reach 70%. million sq. ft. by 2024. Grade-A spaces have witnessed a sharp increase in demand in the last four to five years mainly driven by the GCC and IT sector, which has played a major role in transforming the office space landscape in India and does not confirm these expectations Not only is the commercial real estate sector resilient, but it also underscores the huge opportunities that lie ahead for developers, corporates and investors. “With rents rising in the core markets of the National Capital Region (NCR), Bengaluru and Mumbai, we are likely to see bigger deals in cities like Pune. and Chennai, Hyderabad and Noida, where occupiers will be willing to pay for high-end spaces. Quality. The coming quarters are likely to see growth in office fit-outs, and with market rents tilted towards landlords in key markets, leasing business volumes are also likely to grow. The new government budget is also expected to provide a boost to the infrastructure, financial and financial services sectors, which in turn are likely to keep rents on an upward trajectory.
