Delhi-NCR emerges as 5th most expensive office space rental market in APAC

Despite a challenging global economic backdrop, prime office rents have remained remarkably stable. This stability, coupled with a 50% surge in transaction volumes during Q2 2024,

With a prime office rent of Rs 340 per square foot/month, Delhi NCR ranks as the fifth most expensive office market in the Asia Pacific ( APAC) region, as per property consulting Firm Knight Frank's latest edition of prime rental index for the second quarter of 2024.  Hong Kong SAR continued to be APAC’s most expensive office market during the quarter. 

While Bengaluru remains India's leasing champion, capturing nearly half of the total transactions in the top three cities, Delhi-NCR’s consistent rental performance and strategic location have made it a top choice for corporate occupiers. Mumbai, too, has shown remarkable growth in leasing activity, with a staggering 183.1% year-on-year increase.

Leasing volumes in India's three largest office markets - Bengaluru, Delhi-NCR, and Mumbai Metropolitan Region - surged 50% to 10.5 million square feet in Q2 2024. Bengaluru maintained its position as the country's most active market, with 4.9 million square feet leased in Q2 2024. Robust demand is shifting Bengaluru’s balance slowly in favour of landlords, with prime rents in the city seeing growth during the period.The leadership teams actively encouraging employees to return to office has also positively impacted the transaction volumes in the market. 

Mumbai's office leasing market showed remarkable growth, with approximately 3.0 million square feet leased, representing a 183.1% year-on-year increase. Stand out markets were Mumbai and Bengaluru, where steady momentum has been

building since late 2023, indicating sustained growth in these key markets. Physical occupancy levels have also risen consistently across markets. Major technology firms such as TCS and HCL Technologies are leading this trend, with

leadership teams actively encouraging employees to return to office. With a pro-business leadership set to continue at the helm of the government for a renewed term of five years, the Indian office space market looks on course to conclude 2024 on a new high.

Majority of transactions were driven by India-Facing businesses reflecting a sustained strategic interest in India's consumer markets and its skilled labour pool. 

Prime office rental rates in Delhi-NCR, Mumbai, and Bengaluru have remained stable year on year and current market momentum points toward a stable rental in the rest of 2024 as well. The quarterly report revealed that 15 out of 23 tracked cities reported either stable or rising rental rates.

ASIA PACIFIC PRIME OFFICE RENTS (Q2 2024)

 "India's office space market has seen a surge in global corporate interest, reflecting the country's status as one of the fastest-growing large economies. This has led to record-high transaction volumes in the first half of the year 2024, with a 33% rise YoY, driven by Indian businesses and GCCs. Rental rates have remained steady in the three major occupier markets. With stable socio-economic and political conditions and a strong growth trajectory, we anticipate commercial office space hitting record highs," said Shishir Baijal, Chairman and Managing Director, Knight Frank India, said,

Delhi-NCR

The prime office market in Delhi-NCR has sustained rental values consistently over the past six quarters. With a prime office rent of Rs 340/sqft/month, it ranks as the 5th most expensive office market in the APAC region.

Mumbai

The prime office rent of the city was recorded at Rs 302/sqft/month, ranking it as the 8th most expensive commercial market in the APAC region. Mumbai's office leasing market demonstrated remarkable growth, with around 3.0 mn sq ft leased, marking a 183.1% year-on-year (YoY) increase.

Bengaluru

Bengaluru ranks 18th and is among the most affordable prime office markets in the APAC region.  The prime office rent in the city was recorded at Rs 137/sqft/month, with a marginal YoY increase of approximately 1.3%.  

"The current trend reflects a business cycle downturn. Major office sectors such as finance and technology continue to downsize staff strength amid ongoing uncertainty in the business environment. This selective approach will likely keep demand for office spaces restrained. Lease renewals will remain popular, while companies may also consider consolidating their office spaces due to falling rents prompting a flight-to-quality move. No doubt, occupiers face a slate of competing factors, balancing the new office culture and ESG objectives against business considerations. Despite reduced capital expenditure, occupiers are encouraged to remain aware of the region’s ample supply pipeline to explore quality options and capitalise on current conditions by securing favourable rates, given that new supply is expected to tighten due to high interest rates impacting future construction," said Tim Armstrong, global head of occupier strategy and solutions.