Co-Working Spaces And Global Capability Centres Trigger Growth In Commercial Real Estate Segment

In this special report, Manoj Reddy Sama provides a detailed examination of the key segments within commercial real estate - office spaces, industrial and logistics, and retail - while assessing investment trends and projecting the future outlook for the industry

The Indian commercial real estate market witnessed significant growth in 2024, driven by an increasing demand for office spaces, industrial and logistics hubs, and retail establishments. This expansion was fuelled by strong economic performance, rising foreign and domestic investments, and a stable business environment. Across major cities, leasing activity surged, new properties were introduced, and investment appetite remained high, making commercial real estate one of the most dynamic sectors in the country. A key contributor to this growth was the rising prominence of global capability centres (GCCs) and flexible workspace operators, which continue to reshape the landscape of office leasing and corporate real estate.

Segments of Commercial Real Estate
Office Space Sector
The Indian office real estate market achieved unprecedented leasing activity in 2024, recording a gross absorption of 79.0 million square feet, representing a 16 per cent year-on-year increase. In the fourth quarter (Q4) alone, leasing activity reached 22.2 million square feet, marking an 8 per cent quarter-on-quarter rise. These figures highlight the robustness of demand in India’s commercial office segment.

1. City-Wise Performance: Bengaluru, Hyderabad,Mumbai and Delhi-NCR collectively accounted for 73 per cent of the total space absorption in 2024, reinforcing their positions as key business hubs.

2. New Supply: A total of 52.3 million square feet of new office space was introduced into the market, with a significant 67 per cent concentrated in Bengaluru, Hyderabad and Pune.

3. Key Occupier Segments: The demand for office spaces was primarily driven by technology firms and flexible space operators, which together contributed to 24 per cent and 19 per cent of the total leasing activity, respectively. Banking, financial services and insurance (BFSI) firms accounted for 16 per cent, while engineering and manufacturing companies took up 9 per cent of the leased space.

4. GCCs’ Influence: GCCs played a pivotal role in shaping the office market, accounting for 37 per cent of total office leasing. Their leasing activity grew by more than 20 per cent compared to the previous year. Within the GCC segment, BFSI firms and technology corporates contributed approximately 44 per cent of the total leasing.

5. Domestic Players: The presence of domestic companies remained strong, accounting for 45 per cent of the overall office space absorption. Leading the charge were technology firms, BFSI enterprises, and co-working space operators, who continued to expand their footprints across major cities.

6. Growth Factors and Future Outlook: Despite global economic uncertainties and monetary tightening, India’s office market demonstrated remarkable resilience in 2024. This strength was underpinned by strong economic growth, a steady influx of foreign direct investment (FDI), and corporate confidence in India’s skilled workforce. These factors provided the momentum for sustained expansion in the sector. A key driver of demand has been global capability centres (GCCs),which have contributed between 35-40 per cent of the total leasing activity.

Leveraging India’s business-friendly environment and talent pool, global firms have actively established and expanded their GCC operations, and this trend is expected to continue into 2025 as more multinational corporations seek to consolidate their operations in the country. In addition to the growing dominance of GCCs, flexible workspace operators are gaining traction as hybrid work models become the norm. This trend is reshaping office leasing patterns and providing increased flexibility to occupiers. This broad-based demand from a variety of sectors further positions the market for continued success in the years ahead.

Looking ahead, leasing activity is expected to remain robust through the first half of 2025, supported by economic resilience, corporate expansion strategies, and a steady flow of both foreign and domestic capital into the real estate sector. A diverse set of occupiers, driven by economic growth and supportive policy measures, will continue to fuel long-term growth in India’s office market. DLF, Sobha, Prestige Estates Projects, Brigade Enterprises and Anant Raj are some of the major players that are operating in the office real estate sector

Industrial and Logistics Sector
The industrial and logistics (IL) sector experienced robust growth in 2024, driven by strong demand across various industries, including third-party logistics (3PL), engineering and manufacturing (EM), fast-moving consumer goods (FMCG), and e-commerce. Leasing activity in Q4 FY2024 witnessed an impressive 47 per cent YoY increase, showcasing the continued momentum in this space.

1. Total Absorption - The total leasing activity in the IL segment reached 39.5 million square feet in 2024.
2. New Supply - Developers added 38.6 million square feet of new IL spaces to the market, ensuring a steady supply to meet the growing demand.
3. City-Wise Share - The cities of Delhi-NCR, Bengaluru, Mumbai, Kolkata and Ahmedabad accounted for 80 per cent of the total absorption, reaffirming their importance as industrial and logistics hubs.
4. Key Occupier Segments - The 3PL sector emerged as the dominant player, occupying 41 per cent of the total leased space. Engineering and manufacturing companies followed, accounting for 18 per cent of the demand.
5. Transaction Size - Small transactions involving less than 50,000 square feet constituted 43 per cent of the total leasing. Mid-sized (28 per cent) and large-sized (28 per cent) deals also played a significant role in market activity.
6. Growth Factors and Future Outlook - The strong demand for in-city warehousing and quick-commerce fulfilment centres is driving further expansion in this segment. Government-backed initiatives to promote domestic manufacturing, optimise supply chains, and facilitate e-commerce expansion are expected to sustain momentum in 2025.

Delhi-NCR, Kolkata and Bengaluru are poised to remain major absorption hubs, with larger institutional developers playing an increasingly important role in project completions. Additionally, sustainability measures and ESG considerations will continue to influence investment and development strategies in this space. NDR INVIT Trust, Macrotech Developers and Swan Energy are some of the companies with exposure to the industrial and warehousing sector.

Retail Sector
India’s retail real estate sector witnessed significant growth in leasing and supply additions in the October-December 2024 quarter. A total of 6.4 million square feet. of retail space was absorbed in 2024 and 1.2 million square feet of new retail supply was added in 2024.

1. Key Contributors - The fashion and apparel category remained the dominant segment, accounting for approximately 38 per cent of the total leasing activity, primarily driven by mid-range fashion, value fashion, and athleisure brands. Homeware and department stores contributed about 13 per cent of overall leasing, while the food and beverage sector accounted for approximately 12 per cent.
2. City-wise Performance - Bengaluru, Hyderabad and Delhi-NCR collectively accounted for 59 per cent of the total retail space absorption in 2024, reinforcing their status as key retail hubs.
3. Supply Pipeline - A strong retail supply pipeline is anticipated in 2025, with 5-6 million square feet of Grade A malls expected to become operational in Bengaluru, Hyderabad, Delhi-NCR and Mumbai.
4. D2C Expansion - The direct-to-consumer (D2C) sector experienced robust growth, contributing about 7 per cent of the total leasing activity in 2024. This amounted to approximately 0.6 million square feet of leased space, primarily within fashion, apparel, and homeware segments. Domestic D2C retailers are expected to continue expanding their physical presence, leveraging social media, quick commerce, and enhanced inventory management to boost sales. Prestige Estates Projects, Phoenix Mills and Oberoi Realty have major exposure to this sector. DLF and Brigade Enterprises also have exposure to the retail sector.

Growth Factors and 2025 Outlook

Retail leasing is projected to remain strong in 2025, driven by consistent demand from mid-range fashion, value fashion, athleisure, and jewellery brands. Retail supply is set to rebound, with 5-6 million square feet of Grade A malls likely to launch in major Tier I cities. Retail environments are evolving into holistic destinations that integrate shopping, dining, and entertainment, enhancing consumer engagement through experiential and storytelling-driven experiences. India’s retail sector is poised for substantial growth in 2025. With a strong supply pipeline and sustained demand across key segments, retail leasing is set to remain robust. The transformation of retail spaces into experiential destinations is expected to ensure a dynamic and engaging consumer environment in the coming year.

Conclusion

The record-breaking USD 11.4 billion capital inflow into India’s real estate market in 2024, reflecting a 54 per cent year-on-year growth, underscores the sector’s remarkable resilience. This surge was fuelled by robust demand for office spaces, industrial and logistics facilities, and retail establishments, driven by the expansion of GCCs, co-working adoption, and the e-commerce boom. Looking ahead to 2025 and beyond, the sector is well-positioned for sustained growth, supported by steady investments, evolving occupier needs, and favourable policy frameworks.

Investment momentum is expected to continue, particularly in office assets and residential development. Additionally, the rise of quick commerce and e-commerce will drive warehousing demand. While metros and Tier I cities remain dominant investment hubs, Tier II cities are emerging as attractive destinations, especially in residential, mixed-use, industrial and logistics, retail, and hospitality sectors. With a dynamic and evolving landscape, India’s commercial real estate market is poised for sustained expansion, making it an attractive destination for both domestic and global investors.