India's Office Real Estate Sector Sees 26% Growth in New Supply, Led by Pune
India's office real estate sector experienced significant growth in Q3 2023, with the top six cities recording a 26% annual increase in new office space supply, reaching 16.1 million sq ft. Pune led with 3.70 million sq ft (164% growth), followed by Delhi-NCR with 3.10 million sq ft (35% growth). Chennai saw a 320% jump, while Mumbai doubled its supply. However, Bengaluru and Hyderabad experienced declines. Overall office space absorption across seven major cities increased by 6% to 19.69 million sq ft, driven by global capability centres. Major developers and four listed REITs are actively contributing to the sector's expansion.
*this image is generated using AI for illustrative purposes only.
India's office real estate sector has shown significant growth in the September quarter, with the top six cities recording a 26% annual increase in new office space supply. This surge in supply, reaching 16.1 million sq ft, has been driven by strong demand from both global and domestic firms.
City-wise Performance
| City | New Supply (million sq ft) | Annual Growth (%) |
|---|---|---|
| Pune | 3.70 | 164% |
| Delhi-NCR | 3.10 | 35% |
| Bengaluru | 3.40 | -6% |
| Chennai | 2.10 | 320% |
| Hyderabad | 2.00 | -51% |
| Mumbai | 1.80 | 100% |
| Kolkata | 0.00 | N/A |
Pune led the pack with an impressive 3.70 million sq ft of new supply, marking a substantial 164% increase. Delhi-NCR followed with 3.10 million sq ft, showing a 35% growth. Chennai saw a remarkable 320% jump, adding 2.1 million sq ft, while Mumbai doubled its supply to 1.80 million sq ft.
However, not all cities experienced growth. Bengaluru, typically a strong performer in the office real estate market, saw a 6% decline to 3.40 million sq ft. Hyderabad experienced a more significant drop of 51%, with new supply falling to 2.00 million sq ft. Kolkata recorded no new supply during this period.
Overall Market Absorption
The office space absorption across seven major cities increased by 6%, reaching 19.69 million sq ft. This growth was primarily driven by global capability centres, indicating continued interest from international firms in establishing and expanding their presence in India.
Key Players
Several major developers are contributing to this growth in the office real estate sector:
- DLF Ltd
- Tata Realty & Infrastructure
- Hiranandani Group
- Embassy Group
- Prestige Estates
- Sattva Group
- RMZ Group
REIT Expansion
Four listed Real Estate Investment Trusts (REITs) are actively expanding their office portfolios:
- Knowledge Realty Trust
- Embassy Office Parks REIT
- Mindspace Business Parks REIT
- Brookfield India Real Estate Trust
This expansion by REITs suggests a positive outlook for the commercial real estate sector and indicates growing investor interest in this asset class.
The robust growth in new office supply, particularly in cities like Pune and Chennai, reflects the resilience and potential of India's commercial real estate market. Despite some regional variations, the overall trend points to a strong demand for office spaces, driven by both domestic and international companies. As the sector continues to evolve, it will be interesting to observe how different cities adapt to changing market dynamics and corporate requirements in the coming quarters.
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