Office transactions jump 43%, residential sale surges 9% in Q1 2024

Office space surge: The office space transactions across the top eight markets in India reached 16.2 million square feet (sq ft), marking a 43 per cent year-on-year (YoY) growth in Q1 2024, according to a Knight Frank report.

Bengaluru maintained its position as a leader in this growth, with 3.5 mn sq ft of transactions, contributing 22 per cent of the total office take-up during the quarter. Following closely, the National Capital Region (NCR) emerged as the second most active market with 3.1 mn sq ft of transactions. 

Hyderabad's post-pandemic high

Hyderabad reached a post-pandemic high of 3 mn sq ft in Q1 2024. The surge in office space transactions was 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.

Flex space operators also contributed majorly, accounting for 23 per cent of transactions, with Pune and Bengaluru emerging as the biggest contributors to flex office leasing markets in the country. Moreover, office completions saw an extraordinary growth of 185 per cent YoY to 13 mn sq ft in Q1 2024, led by Bengaluru with 5 mn sq ft and Hyderabad with 3.7 mn sq ft coming online during the quarter. 

India Facing businesses constituted 37 per cent of office demand, while GCCs made up 31 per cent in Q1 2024, with Bengaluru and Hyderabad collectively representing 75 per cent of all transactions within the GCC space. 

Residential market momentum

In tandem with the office market, the residential real estate market continued its momentum, with sales growing by 9 per cent YoY across the top eight cities. Mumbai led the sales volume with 23,743 units sold, representing a 17 per cent increase from the previous year, driven mainly by a surge of 259 per cent in sales of units priced above Rs 1 crore. 

Hyderabad and Pune followed with 15 per cent and 14 per cent YoY growth respectively. However, the market witnessed a shift towards higher-priced segments, with sales of units priced below Rs 50 lakh experiencing a decline of 10 per cent YoY, attributed to factors such as rising prices and higher home loan rates. 

Sales in the Rs 0.5 to 1 crore segment also dropped by 6 per cent YoY, while the Rs 1 crore and above segment saw a notable 51 per cent YoY growth, constituting 40 per cent of total sales in Q1 2024. Despite the increase in unsold inventory levels, the overall market traction improved, with the current quarters-to-sell (QTS) level standing at 5.9 quarters, indicating a better market outlook.

Stable office rentals

Rental values in the office market remained stable or grow across all markets, with Chennai witnessing the highest rental value appreciation of 9 per cent during Q1 2024. Similarly, residential prices appreciated across all leading eight markets, signalling positive momentum in the real estate sector.