Leasing of office space rose by 15 per cent across eight major cities last year, despite a decline in demand in Bengaluru, the largest workspace market, according to Knight Frank.

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In a webinar, real estate consultant Knight Frank India on Wednesday released its report on the Indian housing and office market. The data showed that office demand grew 15 per cent annually to 59.6 million square feet in 2023, despite global economic and geopolitical concerns.

The demand was mainly driven by Global Capability Centres (GCCs), which took on lease 20.8 million square feet last year, up 58 per cent from 2022 level. Knight Frank highlighted that the total office leasing number is the second-best year with the peak level achieved in 2019 at 60.6 million square feet.

According to the data for 2023, compared with the previous year, the leasing of office space in Mumbai grew 16 per cent to 7.4 million square feet. Delhi-NCR saw a 14 per cent rise in office space demand to 10.1 million square feet.

Pune witnessed a 9 per cent increase in leasing to 6.7 million square feet. Office space demand in Chennai surged 92 per cent to 10.8 million square feet. The absorption of office space in Hyderabad rose 32 per cent to 8.8 million square feet.

Kolkata saw a 20 per cent annual growth in leasing to 1.4 million square feet during the last calendar year. But leasing of office space in Bengaluru fell 14 per cent to 12.5 million square feet. In Ahmedabad, the demand fell 15 per cent to 1.8 million square feet.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, "The impetus behind India's recent dominance in office absorption is attributed to its strong economic fundamentals." The year 2024 promises to be a standout year for the office market, driven by India-facing businesses and GCCs, he added.

"India will continue to play up on its natural advantages, which include excellent real estate, highly competitive rents, a very strong talent pool and a consistently growing economy, making it a robust end-user market. These factors will catalyse for advancing further demand for office space," Baijal said.

The surge in flexible workspaces would play a pivotal role in fostering growth-oriented businesses in India, he said. "With these factors in play, we anticipate the office market to reach new peaks in 2024," Baijal said.

Knight Frank noted that India's office space absorption has undergone a shift in characteristics, transitioning from being predominantly led by third-party IT services to being increasingly favoured by GCC in recent years.

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