Domestic Firms to Lead Office Leasing Boom till 2025: CBRE Report

CBRE South Asia's report reveals domestic companies will lease 60-65 million square feet of office space from 2024 to 2025. Local firms have led 47% of leasing activities from 2022 to H1 2024. Key drivers include government initiatives, a thriving start-up ecosystem, and advances in technology.

Domestic firms are expected to lease an impressive 60-65 million square feet of office space between 2024 and 2025, as stated in CBRE South Asia's latest report titled 'India Inc's Ascension - The Rise of Domestic Firms as an Office Demand Driver'.

The report indicates that domestic companies accounted for nearly 47% of office leasing activity from 2022 to the first half of 2024. This marks a significant shift from the previous dominance of global corporations, primarily American firms.

Over 2022-2023, domestic firms saw a 60% surge in office space absorption compared to pre-pandemic figures from 2018-2019. Notably, key occupier groups have secured prime locations in major cities, led by Delhi-NCR, followed by Bengaluru and Mumbai.

E-commerce and life sciences companies have driven occupancy in Bengaluru and Hyderabad, respectively, while Mumbai has captured 43% of the domestic BFSI leasing market, strengthened by contributions from Delhi-NCR and Chennai. According to the report, government initiatives like Make in India and the Production Linked Incentive (PLI) Scheme have bolstered the robust growth of India's office market.

Additional factors include increased domestic manufacturing, employment generation, and a well-capitalized banking sector, fostering a supportive environment for business expansion. Low corporate leverage ratios and improved access to capital have also enhanced investment capacity for Indian companies.

India's rich talent pool, including approximately 2.5 million STEM graduates and a thriving start-up ecosystem with over 100 unicorns, has played a crucial role in driving growth. With over 38 sector skill councils focusing on bridging the skill gap, the government is preparing domestic firms for future demands, augmenting the office leasing sector.

Flexible space operators, technology firms, and the BFSI sector have emerged as primary drivers, collectively accounting for two-thirds of domestic leasing activity. The RCA sector, encompassing legal, taxation, HR, and media services, is also enhancing domestic leasing. Furthermore, Indian engineering and manufacturing firms, currently representing 7-8% of domestic office leasing, are expected to expand into emerging manufacturing hubs in Tier-II and Tier-III cities.

Anshuman Magazine, Chairman and CEO of CBRE for India, Southeast Asia, Middle East & Africa, highlighted, "India's burgeoning start-up ecosystem and talent richness are principal drivers of this demand. With major urban centers growing, the demand for premium office spaces will set new standards for innovation and excellence. India's top nine cities are projected to add around 185 million sq. ft. of premium office space by 2026, reflecting the transformative factors in the commercial real estate landscape."

Ram Chandnani, Managing Director, Advisory and Transaction Services, CBRE India, added, "Technological advancements, particularly in artificial intelligence (AI), are set to further transform the office sector. Although AI might lead to job displacement, it will also create new opportunities, necessitating workforce reskilling. The increasing workforce demands, driven by digitalization, evolving workplace strategies, and enhanced business confidence, have significantly boosted leasing activity."

(With inputs from agencies.)