Q1 2024 office market skyrockets, residential sector hits 86,345 units sold: Knight Frank

New Delhi [India], April 4 : Knight Frank India unveiled a surge in office space transactions across India's top eight markets, reaching a 16.2 million square feet (mn sq ft) and Home sales surged by 9 per cent YoY to 86,345 units in Q1 2024, in their latest report 'India Real Estate: Office and Residential Report (January - March 2024)'.
This marks 43 per cent year-on-year (YoY) growth in Q1 2024. Bengaluru led this charge, securing the top position with 3.5 mn sq ft of transactions, constituting 22 per cent 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 surge in office space transactions was primarily fueled by India-facing businesses and Global Capability Centers (GCC), recording 5.9 mn sq ft and 5.0 mn sq ft of transactions respectively.
Flex space also maintained its momentum, accounting for 23 per cent of transactions, matching its highest quarterly volumes previously recorded in Q4 2021.
Additionally, the office market witnessed 13.0 mn sq ft of completions in Q1 2024, with rents either stabilizing or experiencing robust growth in YoY terms.
Vacancy levels trended down to 15.8 per cent in Q1 2024, reflecting a consistent lag in fresh supplies compared to transaction volumes. Notably, Chennai led the rental growth with a 9 per cent increase year-on-year, followed by Bengaluru at 5 per cent in Q1 2024.
The report emphasized strong expansion in the residential domain across the foremost eight residential markets.
Home sales experienced a substantial 9 per cent year-on-year surge, marking the second-highest increase in six years, following closely behind Q4 2023.
Mumbai led with 23,743 units sold, marking a 17 per cent YoY increase. Homes priced at Rs 10 million and above constituted 40 per cent of sales, driving growth by 51 per cent YoY with 34,895 units sold in Q1 2024.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, commented on the report, stating, "The real estate market experienced another exceptional period characterised 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 INR 1 Crore and above."
He further stated, "This not only demonstrates a strong demand trajectory but also reflects buyers' confidence in making long-term commitments. 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. We anticipate these activities to continue at a robust pace in the foreseeable future backed by the stable economic policies and favourable domestic conditions", Baijal added.
Experiencing a remarkable 43 per cent YoY growth, the Indian office space market maintained its momentum into Q1 2024 following a robust performance throughout 2023.
Leading the charge, Hyderabad emerged as a standout performer, witnessing a staggering 261 per cent YoY surge in office space transactions, closely trailed by Pune with a notable 146 per cent YoY growth.
Office completions saw a growth of 185 per cent YoY to 13 mn sq ft in Q1 2024, largely exaggerated because of the exceptionally low volumes seen in the base period of Q1 2024.
Bengaluru with 5 mn sq ft accounted for 39 per cent of the space coming online during the quarter, followed by Hyderabad at 3.7 mn sq ft.
Viral Desai, Senior Executive Director, Occupier Strategy and Solutions, Industrial and Logistics, Capital Markets and Retail, Knight Frank India, emphasized the buoyant sentiment pervading the economy, underpinned by the upward revision of economic growth projections until FY 2025.
Desai said, "The robust occupier activity witnessed in Q1 2024 is a testament to the buoyant sentiment pervading the economy, underpinned by the upward revision of economic growth projections until FY 2025. This augurs favourably for the trajectory of office space demand in the foreseeable future."
He added, "Notably, India-facing businesses and Global Capability Canters (GCCs) are poised to spearhead market demand during this phase, leveraging India's appeal as a destination for growth amidst prevailing economic and geopolitical uncertainties. As the nation navigates through these turbulent times, the resilience of these sectors underscores their pivotal role in driving sustained economic momentum and fostering a conducive environment for business expansion and innovation."
The real estate sector in India, as highlighted by Knight Frank India's report, is witnessing robust growth in both office and residential segments, underpinned by stable economic policies and favorable domestic conditions.