Transactions in India’s office real estate market witnessed a significant rise of 15% in 2023, according to a report by real estate consultant Knight Frank India. The report, titled ‘India Real Estate: Residential and Office (July-December 2023),’ revealed that a total of 59.6 million square feet were transacted across the country’s leading eight markets, reflecting a strong year-on-year growth.
Although office leasing volumes fell marginally short of the all-time high achieved in 2019, the market’s performance indicates robust occupier activity and highlights the country’s economic strength compared to other major economies. Bengaluru emerged as the largest market, with over 12 million square feet leased in 2023, followed by Chennai with 10.8 million square feet and the National Capital Region (NCR) with 10.1 million square feet.
Chennai recorded the highest year-on-year growth of 92%, whereas Bengaluru experienced a 14% decline in leasing volumes. The office market also witnessed the completion of 42.9 million square feet of office space in 2023.
Rents across all markets increased throughout the year, driven by demand and limited supply. The report also highlighted the growth in residential real estate, citing the sale of 329,097 units across the top eight markets, representing a 5% year-on-year growth. The number of new home launches increased by 7% in 2023, with the addition of 350,746 units.
Among the residential sales, Mumbai led the way with 86,871 units sold, followed by the NCR with 60,002 units and Bengaluru with 54,046 units. These three cities combined accounted for 61% of the total residential sales in 2023.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, emphasized the economic fundamentals behind India’s dominance in office absorption. He predicted steady expansion in the forthcoming year, with 2024 poised to be a standout year for the office market. Baijal attributed this growth to India-facing businesses and Global Capability Centers (GCCs), highlighting India’s excellent real estate, competitive rents, strong talent pool, and consistently growing economy.
The report also noted Gera Developments’ bi-annual report, which revealed that average home prices reached a new high of Rs 5,938 per square foot in December 2023. This figure represents a 17% increase compared to the previous peak in December 2015. The report pointed out that rising salaries and disposable income compensated for the increase in interest rates, strengthening the real estate market further.
With the surge in flexible workspaces and a positive economic outlook, Knight Frank India anticipates the office market to reach new heights in 2024, becoming a catalyst for growth-oriented businesses. The report’s findings underscore the resilience and potential of the Indian real estate sector, positioning it as an attractive and dynamic market for both domestic and international investors.
