Demand for the office space in India will continue to scale up

V Nagarajan

While the top 6 cities will continue to drive contours of commercial real estate in India, newer markets, especially tier II cities, are expected to emerge as high potential growth centers.

Over the next three years (2025-27), engineering & manufacturing and BFSI occupiers are expected to lease about 11-12 million sq ft of office space each on an annual basis, up from 8-9 million sq ft each in the past 3 years.  These will together account for about 40 per cent of the total office space demand, according to Colliers’ latest report “The Multifaceted Occupier Landscape of India Office Market” On the other hand, space uptake by technology firms will eventually stabilise at around 15 million sq ft as they continue to embrace hybrid and distributed working models. Additionally, flex space occupiers are likely to expand into newer geographies, accounting for 15-20 per cent of total office leasing in the next 2-3 years.

“GCC demand too is likely to be on the upswing. Interestingly, as GCCs reposition themselves as knowledge and innovation centers, they are likely to account for almost 40 per cent of the Grade A office space demand in next few years.” At the same time, demand from domestic-origin occupiers will remain robust, with about 30 per cent of the domestic-origin demand likely to come from flex operators. This broadening of demand base augurs well for major office markets across the country in the long-term.” said Arpit Mehrotra, Managing Director, Office services, India, Colliers.

Post-pandemic, average deal size across sectors have rationalised and was at around 43,000 sq ft. in 2023, a 11 per cent dip compared to 2019 levels. At the same time, number of deals rose by 44 per cent during the same period, indicative of the shifts in occupiers’ preference and adoption of for “Hub” and “Spoke” offices. The volume of flex space and engineering & manufacturing deals have particularly surged by over 70 per cent in the post-pandemic period vis-a-vis the pre-pandemic era.

While Bengaluru remains amongst the leading markets for Grade A office demand across sectors, cities such as Hyderabad, Chennai, and Pune are rapidly catching up and seeing heightened demand from flex spaces, BFSI and engineering & manufacturing firms. “The demand scale-up will be evident at a city level also. Amongst the top six cities, Bengaluru can potentially witness annual leasing activity closer to 20 million sq ft, while Delhi NCR and Hyderabad are expected to see office space demand in upwards of 10 million sq ft in the next few years. Mumbai, Pune and Chennai too are likely to witness annual demand uptick by 20-30%. Furthermore, we anticipate healthy traction in office markets of relatively smaller cities such as Bhubaneshwar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Thiruvananthapuram etc.” said Vimal Nadar, Senior Director & Head, Research, Colliers India.

On an average, rentals in micro markets preferred by leading BFSI occupiers are 44 per cent higher than those preferred by engineering & manufacturing firms. Technology firms, meanwhile, are more evenly spread across central, suburban, and peripheral districts. On the other hand, flex operators tend to favor SBDs for their strategic location, connectivity, and developed infrastructure.

Overall, with commercial real estate in India being increasingly defined by sustainability and quality, it is anticipated that multiple opportunities for developers and investors to lead in sustainability and meet evolving occupier preferences. Looking ahead, nearly 80 per cent of the 160 million sq ft of upcoming supply over the next three years is expected to be green certified, underscoring the shift towards more sustainable real estate development.

I have entered into a JV with a developer and the construction is partially completed but completion certificate has been issued for part of the project. In such a scenario, how the capital gain charged for tax purposes? Ram Pravesh, Sharjah

Generally, capital gain shall be chargeable to tax in the year in which certificate of completion for the whole or part of the project is issued by the competent authority. In your case, capital gain proportionate to the land involved in the part of the project for which certificate of completion has been issued shall be chargeable to tax in the year in which such certificate has been issued by the competent authority.

My father died intestate and left immovable property. How does the asset transfer takes place among the family members in the absence of Will? Please clarify. Ashish Mahajan, Abu Dhabi.

When there is no Will, you will have to provide substantial proof of legal heirship and need to obtain the succession certificate. The district judge issues the succession certificate within whose jurisdiction your father ordinarily resided at the time of death. All the legal heirs will have to approach a competent registrar of assurances with the succession certificate and a copy of the death certificate of the deceased. Mutation of the property is also required for the change in ownership in land revenue records. The court normally charges a fixed percentage of the estate value as its fee.