Office market surges to 16.2 m sq ft transactions in Q1 2024: Knight Frank India

Office space transactions across the top eight markets in India touched 16.2 million square feet (mn sq ft) in Q1 2024, marking a 43% year-on-year (YoY) growth in Q1 2024. As far as the residential market is concerned, home sales surged by 9% YoY to 86,345 units, second only to Q4 2023 in six years. Mumbai led with 23,743 units sold, marking a 17% YoY increase, a report by Knight Frank titled India Real Estate: Office and Residential Report (January – March 2024) has said.
Bengaluru spearheaded the office market growth, securing the top position with 3.5 mn sq ft of transactions, constituting 22% of the total office take-up during the first quarter of 2024,
The National Capital Region (NCR) emerged as the second most active office market with 3.1 mn sq ft of transactions. Hyderabad also demonstrated consistent growth, achieving a post-pandemic high of 3 mn sq ft in Q1 2024.
The office space transactions were primarily driven by India-facing businesses and Global Capability Centres (GCC), recording 5.9 mn sq ft and 5.0 mn sq ft of transactions respectively. During the first quarter of 2024, Bengaluru and Hyderabad collectively represented 75% of all transactions within the GCC space.
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Flex space operators accounted for 23% or 3.8 mn sq ft of the transactions in Q1 2024. With transactions volume of 1.15 mn sq ft and 0.92 mn sq ft, Pune and Bengaluru respectively were the biggest contributors to flex office leasing markets in the country, the report said.
India facing business continued to anchor the Indian office market and constituted 37% of office demand with transaction of 5.9 mn sq ft. Mumbai and NCR were the biggest contributors in this segment with transaction volumes of 2.4 mn sq ft and 1.5 mn sq ft respectively. Additionally, the office market saw 13.0 mn sq ft of completions in Q1 2024. Bengaluru with 5 mn sq ft accounted for 39% of the space coming online during the quarter, followed by Hyderabad at 3.7 mn sq ft.
Notably, Chennai led the rental growth with a 9% increase year-on-year, followed by Bengaluru at 5% in Q1 2024. Mumbai and NCR grew by 4%. Mumbai recorded the highest office rental at ₹115.1 per sq ft per month followed by NCR at ₹86.8 per sq ft per month in Q1 2024.
In Q1 2024, home sales surged by 9% YoY to 86,345 units, second only to Q4 2023 in six years. Mumbai led with 23,743 units sold, marking a 17% YoY increase. 
Homes priced at ₹10 million and above constituted 40% of sales, driving growth by 51% YoY with 34,895 units sold in Q1 2024. 
The need for larger living spaces and an upgraded lifestyle was sparked during the pandemic continues to fuel demand in this segment. Sales in this segment have grown by 51% YoY and it has been the primary driver for overall sales growth during the quarter. With sales of 10,558 units, this segment constituted 68% of the total sales volume in the NCR which is the highest for any city in the country. NCR is followed by Mumbai and Bengaluru at 7,401 units and 6,075 units respectively. 
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Units priced between ₹5-10 million saw a 6% YoY correction with 28,424 units sold, while units under ₹5 million experienced a 10% YoY decline with 23,026 units sold, continuing a nine-quarter deceleration trend.
The share of sales in the ₹5 mn ( ₹50 lakh) and below ticket-size has declined by 10% YoY with sales of 25,714 units in Q1 2023 to 23,026 units in Q3 2023. The combined impact of rising prices, higher home loan rates, and the relatively adverse effects of the pandemic in this sector persisted, suppressing demand. The current sales share of 27% is a far cry from the 41% levels in Q1 2022.
Mumbai witnessed the highest sales volume and YoY growth, with 23,743 units sold in Q1 2024, marking a 17% increase from the preceding year. The surge was predominantly driven by a 259% rise in the sales of units priced above ₹10 million compared to the corresponding period in the previous year (Q1 2023). Sales volumes in Hyderabad grew by 15% YoY, followed by Pune at 14% YoY during the quarter.
New launches were recorded at 93,254 units, surpassing sales in this quarter. Depleted older inventory drove consumers to newly launched properties at attractive prices, lowering average inventory age to 15.9 quarters in Q1 2024 from 16.7 at the end of 2023, the report said.
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A total of 93,254 new residential units were launched in Q1 2024 registering a growth of 7% YoY. Kolkata experienced the most significant growth in units launched, with a YoY increase of 89%, reaching a record high for the market with 6,021 units launched.
The weighted average prices have appreciated for all the leading eight markets in tandem with demand growth in YoY terms. New home prices in Hyderabad saw the sharpest rise at 13% YoY as focus increasingly shifted toward the development of premium properties. Mumbai continued to be the most expensive market at ₹7,891/sq ft.
“The real estate market experienced another exceptional period characterized by robust performances in both the office and residential sectors. The residential segment particularly witnessed a significant surge, propelled by continued growth in sales in the higher price category of ₹1 crore and above. This not only demonstrates a strong demand trajectory but also reflects buyers’ confidence in making long-term commitments,” said Shishir Baijal, chairman and managing director, Knight Frank India.
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Concurrently, the office sector maintained its upward trajectory, delivering one of the most impressive quarterly demand performances to date. The country’s economic stability has spurred businesses operating in India to expand their operations, consequently driving demand for office spaces. Additionally, many companies are now reverting to conventional office setups, either reducing or discontinuing their work-from-home policies, further boosting demand, he added.