Knight Frank, in its latest edition of the Asia-Pacific Prime Office Rental Index for Q2 2024 noted that Delhi-NCR is the 5th most expensive office space rental market across the APAC region.

Hong Kong SAR continued to be APAC’s most expensive office market during the quarter.

Transaction activities across India’s three major occupier markets saw a notable 50% increase in Q2 2024, maintaining the robust occupier sentiment that has fuelled leasing activities since 2023, marking the highest levels since 2019.

The majority of transactions were driven by India-facing businesses reflecting a sustained strategic interest in India’s consumer markets and its skilled labour pool.

Bengaluru retained its position as the leading destination among the three Indian cities, with 4.9 million square feet (mn sq ft) leased in Q2 2024. The leadership teams actively encouraging employees to return to office has also positively impacted the transaction volumes in the market.

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

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “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.”

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 INR 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 INR 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 INR 137/sqft/month, with a marginal YoY increase of approximately 1.3%.

Tim Armstrong, global head of occupier strategy and solutions, Knight Frank, said, “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,” Armstrong added.