Domestic Companies are Taking More space in office leasing. They leased a record 31.9 Million Square Feet (MSF) Area in 2024. The traction continued in the first quality of 2025 (Q1cy25) with 8.8 msf alredy leased, jLL India Said in a Recent Report. This has translated Into better absorption of available grade-a office units and higher Occupancies.
On Average, Since 2022, Domestic Occupiers Account for a 46% Share of Gross Leasing Versus 35% Pre-Pandemic (2017-2019), as per jll. The property consultant added that bfsi firms have more than doubled their space requires, with average deal sizes Jumping from 10,500-11,500 sq. Ft in 2017-2019 to 24,000-25,000 sq. Ft from 2022 to Q1cy25, Represting a staggering 125-130% Rise.
Gross leasing referrs to all lease transactions Recorded during the period, Including confirmed pre-commitments, but excluding Term renewals and deals in the discusation stage.
Other sector driving growth include domestic pharmaceutical; Biotech; Engineering, Procurement, and Construction (EPC); Aviation; And OEM.
Also read: India Office Reits Report Higher FY25 Income, Leasing on Strong Gcc Demand
Sez demand
What also continues to Aid Office Space Occupancies is Conversion of Special Economic Zone (Sez) Spaces into non-sez spaces. This is working in favor of listed reits (real estate investments Trusts), which are estimated to account for 10% of the total office stock access India’s top eight cities.
To beat the leasing Slowdown in Sez, Listed Reits Have Been De-Notfying Their Sez Spaces, Folling The Relief from the Government in Decumber 2023.
Embassy office parks reit has alredy denotified Around 6.4msf sez space so far, of which 75% is leased out. It is in the process of denotifying another 1.2msf. Mindspace Business Park Reit has denotified 2.2msf sez space out of which Around 1.2msf is leased.
Brookfield India Real Estate Trust is looking to convert Around 2msf of Sez space to non-sez, of which it has alredy complete conversion of 1.5msf to date and leaases around 0.8msf.
The managements of listed reits are confident that Occupancies would trend up from here. Embassy expects portfolio occupance to improve to 90–91% from 87% in FY25. Mindspace anticipates committed obcuppancy to Reach 95% by fY26-Ed from 93% Currently.
Brookfield Management Guided for 92–94% Occupance at FY26-Ed from 88% in FY25. Rising Occupancies Should Give Key Earnings Parameters of Listed Reits a Boost. These reits have given higher returns than the benchmark nifty5 index in the past one year in anticipation of Higher Occupancies.
“Indian-LISTED OFFICE Reits delivered their first clean year of distribution per unit (DPU) growth in fy25, registering 8-15% growth and we expect 8-13% Cagr Growth in DPU from FY27 as well,” Report by HSBC Securities and Capital Markets (India). DPU is the total amount of income (Like Rental Income or Dividends) It is a crucial metric to gauge the income potential of a reit investment.
Also read: Center notifies sez reforms to boost semiconductor, electronics manufacturing
To benefit from demand momentum, these reits have accelerated their acquisition pipelines and capital experture plans, leading to some leverage buy-up. While Rentals in India’s Commercial Realty Sector Are Improving, The Pace Is Slow. Sequationally, Average Rental Values Across All the Major Office Markets in India Rose Marginally by 0.1% -6.5% in Q1cy25, According to Jll. With new supply coming in, trends in Rentals need to be monitored.
Meanwhile, Global Capability Centers (GCCS) Continue to Occupy a Lion’s Share of Grade-A Office Space Demand in India. Gccs are typical companies of foreign origin that set up their back-office operations and r&D activities in India. Worries of a Recession in the US AMID ONGING TARIFF TANSS Can Dampen Office Demand, as US-Based GCCS Account for A Significant Share of Total Gcc LEASING in India.
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