Looking ahead to 2025, stable economic growth, potential interest rate cuts, and regulatory support are expected to sustain demand across real estate sectors
How has the demand for commercial spaces (IT, retail, warehousing) evolved across different cities in 2024?
The demand for commercial spaces across India in 2024 has seen dynamic growth, reflected by strong domestic as well as global demands. In 2024 overall office leasing recorded a historic high of 79 million square feet on a pan India level. Interestingly, this upward momentum was largely fuelled by domestic firms that accounted for 45% of the total office space absorption in 2024. Global Capability Centres (GCCs) remain a key highlight with global firms actively expanding their GCC operations by capitalising on the country’s skilled talent pool and a favourable business climate. In 2024 GCCs maintained strong leasing at 29.4 mn. sq. ft. with a share of 37% of the overall leasing activity across the top 9 cities in India and registering about 29% Y-o-Y growth. Bengaluru recorded the highest office leasing in the country at 21.8 mn. sq. ft. in CY 2024 ahead of 9 top cities in the country with the city’s tech sector recording 29% of office space leasing.
Leasing activity in the industrial & logistics segment has also been robust, reaching 27.5 million square feet in the first nine months of the year. Cities such as Delhi-NCR, Kolkata, and Bengaluru account for over 60% of total demand, with third-party logistics (3PL) companies driving the majority of leasing. Interestingly, smaller cities like Chandigarh, Hosur, and Jaipur have demonstrated resilience, becoming attractive destinations for investors and occupiers due to improving infrastructure and rising disposable incomes.
The retail segment has shown remarkable resilience despite limited new supply. Total leasing is estimate to cross 6-6.5 million square feet of space absorbed so far, categories like fashion, apparel, and food and beverage have led the leasing momentum. Tier-I cities have seen consistent rental value growth, reflecting strong demand for high-quality retail spaces, while luxury brands and direct-to-consumer (D2C) companies have further diversified the leasing landscape. Across these segments, there is a clear emphasis on sustainability, flexibility, and quality. The shift toward green-certified spaces and the "flight to quality" trend reflects businesses' prioritization of innovation, collaboration, and employee well-being. Additionally, the growing interest in tier-II and tier-III cities highlights a broader geographic spread of opportunities, driven by improved infrastructure and localized demand. Looking ahead, the commercial real estate sector in India is poised for continued growth, with leasing activity in the office, retail, and logistics sectors expected to set new benchmarks. This evolution aligns with India’s broader economic trajectory, affirming the country’s status as a critical market for both global and domestic investments.
Apart from IT, retail, and warehousing, how did segments like co-working spaces, integrated township, data centers, and retail spaces performed?
The co-working and flexible office segment exhibited promise with significant leasing being recording in 2024. On a pan-India basis, overall, office leasing recorded a historic high of 79 mn. sq. ft. in 2024 across nine cities. Interestingly, the flex segment commanded 19% share of overall space take-up, reiterating the segments strong fundamentals in terms of demand. The flexible space segment is expected to see significant expansion, driven by cost optimization and scalable solutions. Occupiers are likely to increase flexible spaces in their portfolios, targeting 80 million sq. ft. by the end of 2024. Hybrid work models and the rise of collaborative hubs will drive demand for customized, short-term leases. Flexible spaces are evolving beyond traditional coworking setups, integrating tech-enabled environments and employee-focused amenities to enhance productivity and collaboration. This trend reflects occupiers’ priorities to balance efficiency with flexibility, ensuring that flexible workspaces remain integral to their real estate strategies.
The country’s accelerated technology proliferation, digital transformation, increased internet penetration, policy enablers, and growth in AI-generated data workload are the primary growth drivers for the data centre segment. India’s current data centre capacity stands at ~1,255 MW, and it is projected to further expand to around 1,600 MW by the end of 2024. Besides, the sector is poised for significant growth in 2025, with nearly 475 MW of capacity under construction across major cities like Mumbai, Chennai, and Delhi-NCR with key drivers for the year ahead including BFSI and Technology companies. Given the current growth curve, it is forecasted that cumulative investment commitments in data centres is likely to surpass USD 100 Bn by the end of 2027.
How did macroeconomic conditions, like inflation or GDP growth, impact commercial real estate and how will these conditions shape the demand in 2025?
In 2024, India's commercial real estate sector thrived amid favourable macroeconomic conditions, including robust GDP growth and strong investor sentiment, despite global inflationary pressures. Contributing approximately 7.3% to the GDP, the sector underscored its critical role in the economy. Demand surged across offices, industrial, retail, and residential segments, fuelled by increased capital inflows and substantial foreign investments. Office leasing hit record highs, driven by global capability centers and domestic firms, while the industrial and logistics sector saw strong uptake from third-party logistics providers. High-end and luxury residential properties also experienced notable growth, boosting overall market momentum. Looking ahead to 2025, stable economic growth, potential interest rate cuts, and regulatory support are expected to sustain demand across real estate sectors. While rising construction and land costs remain a challenge, they are likely to drive demand for high-quality, sustainable, and flexible spaces in offices and industrial segments. Businesses will increasingly seek modern, green-certified office spaces and advanced, well-located warehousing. In the residential segment, urbanization and higher disposable incomes will continue to fuel demand, particularly for mid-end and luxury properties. Retail leasing trends will be shaped by rising consumer spending and the growth of D2C brands. Overall, macroeconomic stability, coupled with a focus on sustainability and premium developments, will define the real estate market’s trajectory in 2025.
What are the growth projections for the commercial realty sector in 2025? Which segments are expected to drive demand in 2025?
India's real estate market experienced a heightened phase of expansion and transformation in 2024, positioning it as a standout year in the sector's history. Despite challenges such as monetary tightening and global uncertainties, the market performed better than anticipated. The country's economy showcased resilience throughout the year and is expected to carry forward this positive momentum into 2025, driven by robust domestic growth and continued investments. Along similar lines, the office sector surpassed expectations in 2024 with gross absorption surpassing the previous peak to maintain an upward trajectory. Buoyed by steady inquiries and strong occupier confidence, the demand for office spaces is anticipated to remain stable in the first half of 2025. While expansionary activity would remain robust across various sectors, some occupiers might exhibit cautious optimism while focusing on operational efficiency in their existing portfolios.
The industrial and logistics sector will also experience strong growth, fuelled by the continued dominance of third-party logistics (3PL) providers and the rise in e-commerce and retail sectors. Leasing activity in warehousing is expected to accelerate, particularly in metros and tier-II cities, with demand for smaller, flexible warehouse spaces further intensifying. The demand for high-quality industrial spaces will continue, supported by infrastructure improvements and rising disposable incomes. Additionally, the residential sector, especially in the mid-end and luxury segments, is anticipated to remain buoyant, as homeownership continues to be a priority for consumers. The retail segment is also expected to see continued momentum, driven by fashion, D2C brands, and the growing demand for premium retail spaces, particularly in tier-I and II cities. Overall, the commercial real estate sector in 2025 is poised for sustained growth, driven by demand in office, industrial, retail, and residential segments, with an increasing focus on sustainability and flexibility.
What impact will technology have on the growth and functionality of data centers and warehouses in 2025?
India’s data center market is poised for transformative growth, with CBRE forecasting cumulative investments to exceed $100 billion by 2027. This surge in capital is set to enhance infrastructure and capabilities, enabling data centers to support advanced technologies such as AI, 5G, and cloud computing. These investments are expected to drive significant capacity expansion, with projections indicating a rise to 2,070 MW by the end of 2025, up from the current 1,255 MW. Approximately 475 MW of capacity is currently under construction in major cities like Mumbai, Chennai, and Delhi-NCR, reflecting the increasing demand from key sectors such as banking, financial services, insurance (BFSI), technology, and telecommunications. Furthermore, technology advancements are spurring the growth of data centers in emerging Tier-II cities like Ahmedabad and Kochi. These cities are gaining attractiveness due to growing regional data consumption and cost-efficiency benefits. This shift points to a broader geographical spread of data center operations, enhancing overall functionality, accessibility, and capacity across India.
Global Capability Centers (GCCs) emerged as a key driver of demand for office spaces in 2024. What is the outlook for this segment in 2025?
Global Capability Centers (GCCs) have played a pivotal role in driving demand for office spaces in 2024, accounting for 37% of leasing activity, particularly in key cities like Bengaluru, Hyderabad, Pune, and Chennai. Their significant contribution reflects the growing trend of multinational companies establishing or expanding their operations in India. GCCs require scalable, high-quality office spaces to accommodate their diverse functions, from research and development to back-office operations and IT services. As these centers become increasingly integral to global business strategies, their demand for office space is expected to continue strengthening into 2025.
Global firms actively established and expanded their GCC operations in India, leveraging the country’s skilled talent pool and favourable business climate. This growth momentum is expected to continue into 2025, with new entrants setting up global centers and existing firms scaling their facilities. Companies from sectors like technology, E&M, and BFSI are anticipated to drive demand for both traditional and flexible office spaces for their GCCs. Niche sectors such as automobile, semiconductors, and life sciences will also continue to contribute to the demand for office spaces. A diversified occupier base, fuelled by economic growth and strategic policy measures, will shape office space absorption trends in 2025. Leasing activity from sectors beyond technology, as well as increased contributions from emerging markets and the growth of domestic firms' portfolios, will drive the office market.