India faces shortage of quality offices amid robust leasing

India is facing a shortage of about 20 million square feet of Grade A+ office every year with demand for quality office outstripping supply.

According to Cushman & Wakefield's data, in 2023, against the supply of 24.8 million square feet (msf)of Grade A+ buildings, the net absorption was 40.9 msf while in the current financial year, till September already 33.7 msf has been leased against the supply of 13.9 msf.

The gross leasing volume, which includes renewals of contracted term by corporates in addition to fresh space take up, was 72 msf in 2022 and 74 msf in 2023 and is expected to reach 80 msf in the current year.



"Leveraging on the young and qualified talent pool, global companies continue to invest in India. Most of them wish to create workplaces similar to their home countries. In doing so they emphasise and tend to choose commercial real estate which has preference for sustainability, safety, amenities and experiences, in addition to good location. The combination of these makes the property gradeA++," said Sriram Khattar, managing director, DLF Rental Business.

This would be the third consecutive year of surpassing the 70 msf milestone- a first in India's office space leasing history.

"Last six to 12 months have been extremely strong in terms of leasing, any space that we have available to lease is fully leased and we are building faster to meet the growing demand. We are very confident the demand will continue. How much to build, is the cycle, which is always tricky to capture. I wish we had built more for the second half of 2024, right now demand is outstripping supply ," said Sumit Gera, CEO, India Business Parks -CapitaLand.

"There has been a sharp rise in preference for premium GradeA+ office assets in recent years, widening the vacancy rate gap between premium and other assets. The supply of GradeA+ assets is lower than the overall net absorption of office spaces across the top-8 cities of India, with a gap of 20 msf as of 2024.

This underscores the need for strategic planning and development to bridge this gap and meet the evolving occupier needs," said Anshul Jain, chief executive, India, Southeast Asia and APAC Tenant Representation, Cushman & Wakefield.

Due to the strong demand, four listed real estate investment trusts (REITs) have distributed a total of ₹2,754 crore to their unitholders during the first half of the current financial year, as per data from the Indian REITs Association (IRA).

This represents an almost 14% increase from the ₹2,417 crore distributed in H1 of the previous fiscal year.