The Transition from Ownership to Leasing: A Strategic Shift for Businesses
Businesses all over India are increasingly moving away from owning office spaces and embracing leasing as a more flexible and cost-effective option. This model has emerged as a strategic approach to scaling operations, optimizing space utilization and ensuring agility in a rapidly evolving business environment.
Leasing offers the freedom to scale operations quickly—whether by expanding, downsizing or relocating to more strategic locations. For many companies, especially those in the tech, e-commerce, and BFSI sectors, the ability to remain nimble in response to changing market conditions has made leasing an increasingly attractive option.
The growing preference for leased office spaces is evident in the latest data from the Cushman & Wakefield and CBRE reports. In Q3 2024, the gross leasing volume (GLV) in India’s top eight cities reached 24.8 million square feet (MSF), marking a 66% annual increase and a 14% growth over the previous quarter. Bengaluru, the country’s technology hub, led the GLV with a 28% share followed by Mumbai (21%), Delhi NCR (15%) and Hyderabad (14%).
The IT-BPM sector accounted for the largest share of leasing activity, with approximately 32% of the total GLV in Q3 2024. Flexible workspaces, which continue to rise in demand as companies embrace hybrid work models, made up 15%, while BFSI accounted for 14%. These figures demonstrate the critical role that adaptability plays in today’s real estate market. Leasing has allowed businesses to adapt quickly without being tied down by ownership responsibilities.
Domestic Firms Driving Leasing Growth
While multinational corporations have historically been the largest occupiers of office spaces, domestic firms are now leading the way in office leasing. According to the CBRE report, domestic companies accounted for 47% of overall office leasing activity between 2022 and the first half of 2024. This shift marks a significant change from the traditional dominance of global corporations, particularly American firms.
The demand for office leasing space among Indian companies is expected to grow significantly. In fact, domestic firms are predicted to lease 60-65 million square feet of office space in 2024-2025. Bengaluru and Hyderabad, in particular, have seen a marked increase in occupancy by e-commerce and life sciences firms, respectively, reflecting their robust growth.
Developments and Challenges in the Leasing Market Real estate developers, including Rajdarbar Realty, are adapting to this shift by focusing on flexible, high-quality office spaces that cater to the needs of a variety of businesses. In Q3 2024, new completions totaled 10 million square feet, with Bengaluru and Hyderabad accounting for half and a quarter of the completions, respectively. Additionally, net absorption for Q3 2024 was 12.6 million square feet, a 55% surge from the previous year, underscoring strong demand for office spaces.
Looking ahead, the future of office leasing in India appears promising. The rapid expansion of India’s startup ecosystem, the increasing availability of STEM talent and the growth of sectors like technology, life sciences and BFSI are all expected to drive the demand for leased office spaces. Advances in technology, such as AI, IoT and smart buildings will make leased spaces more efficient and attractive to businesses, offering greater cost savings and operational flexibility.
Radheecka Rakesh Garg Director Rajdarbar Realty
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