Indian office rentals outpace global trends with 4–8% growth

Indian cities are witnessing a surge in office rental growth, with Delhi recording a notable 8.2% increase and Mumbai close behind at 6.7%. This robust performance sets India apart from global counterparts like New York and Shanghai, where office rentals have declined amid economic uncertainties and evolving workplace models.

Despite ongoing global challenges in the rental and leasing market, Indian cities are bucking the trend and recording steady growth. A recent report by real estate services firm Vestian reveals that the top seven Indian office markets have posted rental growth ranging between 4 and 8%, even as major global cities continue to grapple with declining office space rents.

According to the Vestian report, India’s national capital, Delhi, recorded the highest rental increase at 8.2%, followed closely by Mumbai at 6.7% and Bengaluru at 4.7% in 2024 compared to the previous year. These numbers are especially significant in light of the negative rental growth observed in several international cities. For instance, New York’s office rental market saw a decline of 1.3%, Seattle dropped by 1.9%, Hong Kong saw a sharper fall of 6%, and Shanghai registered the steepest decline among the surveyed cities at 6.8%.

Interestingly, while a few global markets like London and Miami did report notable rental increases of 31% and 53% respectively, these are outliers in an otherwise slowing global market. According to the report, this global deceleration is largely due to rising vacancy rates and changing workplace models, influenced in part by the growing adoption of remote and hybrid work, as well as advances in technology such as generative AI.

Shrinivas Rao, CEO of Vestian, explains that the dip in office rentals across many global cities stems from evolving office space utilization strategies and a redefined need for physical workplaces. However, he highlights that India is charting a different course, driven by robust demand and structural economic strengths.

India’s continued growth in commercial office space rentals is underpinned by high demand from sectors such as Information Technology and the expanding footprint of Global Capability Centers (GCCs). These organizations are increasingly choosing India as a base for their back-office, research, and development operations, benefiting from the country’s cost advantage, skilled workforce, and stable business environment.

“India is witnessing a surge in leasing activity due to a combination of factors including economic stability, a favorable demographic dividend, rapid urbanization, and a large, skilled workforce available at competitive costs,” Rao said. “These advantages make India a magnet for global enterprises, particularly those in the technology and financial services sectors.”

The Vestian report notes that India’s affordability remains a significant advantage in the global landscape. While international corporations are still seeking premium office spaces, India’s pricing and expansion-led leasing strategies are proving more sustainable. Prime commercial zones such as Mumbai’s Bandra-Kurla Complex (BKC) and Delhi’s Connaught Place are commanding average rentals of USD 3–4 per square foot per month, making them attractive yet cost-effective compared to other major international business hubs.

The report also emphasizes that strong economic activity and mega infrastructure projects are contributing to the rising demand for office spaces across Indian cities. Projects such as metro expansions, smart city initiatives, and industrial corridor developments are adding to the appeal of Indian metros as commercial real estate hotspots.

In 2024 alone, rental rates in Indian cities have grown between 3.8% and 8.2%, reflecting a healthy appetite for office space despite global uncertainty. This upward trajectory is expected to continue, particularly as multinational firms look to optimize operational costs and tap into India’s growing consumer base and digital infrastructure.

Overall, the report presents a promising picture for India’s commercial real estate sector. While the global market remains cautious and adaptive in response to shifting work models, India stands out as a bright spot, characterized by strong fundamentals, consistent demand, and investor confidence.

While much of the world continues to experience a rental downturn amid economic shifts and technological disruption, India’s commercial property sector remains resilient. Fueled by business expansion, affordability, and a robust workforce, Indian cities are poised to maintain their upward trajectory in office rentals, offering a compelling narrative in an otherwise subdued global real estate market.