Commercial leasing in South Indian cities has grown significantly over the past six years, with Bengaluru, Hyderabad, and Chennai recording the highest rental increases. According to Anarock Research, office rentals in these cities have risen by 26% on average, driven by IT sector demand, the growth of flexible workspaces, and increased investments from global corporations.
Bengaluru saw a 26% rise in office rentals, increasing from ₹74 per sq. ft. in 2019 to ₹93 per sq. ft. in 2024. Hyderabad followed with a 25% increase, reaching ₹67 per sq. ft. from ₹56 per sq. ft. Chennai recorded a 20% rise, moving from ₹60 per sq. ft. to ₹75 per sq. ft.
Other cities also witnessed rental growth, though at a slower pace. Pune saw a 19% rise, increasing from ₹68 per sq. ft. to ₹81 per sq. ft. MMR recorded a 13% increase, reaching ₹140 per sq. ft. from ₹124 per sq. ft. NCR had the lowest growth among major cities at 10%, with rates rising from ₹78 per sq. ft. to ₹86 per sq. ft.
Despite the addition of 48.11 million sq. ft. of new office space in 2024 across the top seven cities, vacancy rates declined to 16.5% from 17.8% in 2023. However, vacancy rates remain above the 13.5% level seen in 2019. Among the cities, Chennai had the lowest office vacancy at 9.3% in 2024.
Bengaluru, Hyderabad, and Chennai accounted for a significant portion of office space absorption, capturing 57% of new office supply. The presence of strong IT infrastructure and a skilled workforce contributed to this trend. Global capability centers (GCCs) and multinational corporations played a role in sustaining demand.
According to Peush Jain, MD-Commercial Leasing and Advisory at Anarock Group, demand from the technology sector and flexible workspace providers is expected to continue over the next six to eight quarters.
From 2019 to 2024, 283.21 million sq. ft. of office space was added in the top seven cities. The highest addition was in 2022, with 57.75 million sq. ft.
South Indian cities contributed 172.96 million sq. ft., making up 61% of the total supply. Western cities, including Pune and MMR, added 60.31 million sq. ft. (21%), while NCR contributed 47.39 million sq. ft. (17%).
Hyderabad, Bengaluru, and Chennai together accounted for 57% of new office supply, adding 27.65 million sq. ft. MMR and Pune contributed 30% (14.5 million sq. ft.), while NCR had a 12% share, adding 5.93 million sq. ft.
The co-working sector has expanded over the past six years. In 2019, it made up 15% of total office leasing in the top seven cities, rising to 25% in 2023 before slightly declining to 21% in 2024.
The BFSI sector increased its share from 7% in 2019 to 17% in 2024. Meanwhile, the IT/ITeS sector, which historically led office leasing, saw its share decline from 42% in 2019 to 28% in 2024. This reflects a shift in demand across industries.
The commercial office market in South Indian cities is expected to remain strong due to ongoing demand from multinational corporations, GCCs, and technology-driven enterprises. India’s economic growth will likely encourage further expansion by global firms, supporting office space demand.
