India's high-activity micro markets to drive 80 pc of office demand and supply in few years

High-activity micro markets across the top seven cities of the country have been witnessing consistently high demand and supply since 2020. Of these, four high-activity micro markets are in Bengaluru, three each in Delhi-NCR and Pune, two each in Chennai and Hyderabad, and one in Mumbai, according to Colliers data.

These micro markets are spread across secondary and peripheral business districts and will continue to drive India office market over the next few years amid city expansions, ongoing infrastructure developments and evolving work models.

"India's office market is poised for a steady strong growth, led by 15-20 high-activity micro markets. While some of these micro markets are already established commercial real estate hubs, emerging micro markets can potentially scale up and witness heightened traction in the upcoming years," said Arpit Mehrotra, Managing Director, Office services, India, Colliers.

Interestingly, India will continue to be strategically positioned in terms of rental arbitrage, with more than half of the Grade A demand expected in micro markets having sub or near dollar rentals, Mehrotra added.

Of the total 38 million sq ft of flex space leasing across the top seven Indian cities since 2020, 59 per cent corresponded to the top 10 micro markets. Within these, SBD-Hyderabad, ORR-Bengaluru and Baner-Balewadi, Pune cumulatively drove around one-third of the flex space uptake in India.

On the GCC front, nearly 70 million sq ft of GCC demand during the last five years has been concentrated in the top 10 micro markets, accounting for 73 per cent of the total GCC leasing in India, said the report.

Although most micro markets in India have seen a rental appreciation compared to pre-pandemic levels, select micro markets in Mumbai and Delhi-NCR continue to lead in terms of average rentals. Of the 488 million sq ft of REIT-worthy office stock in India, 56 per cent is in the top 10 micro markets.