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The Indian A-Grade leasehold office space markets in India are currently at an all time high; both in terms of the quantum of space leased per annum and the prevailing rental values. A study conducted by global property advisers DTZ, reveals that while demand for the A-Grade leasehold office space in India continues to remain healthy, most cities in India, are seeing the beginning of an oversupply situation of office space that will continue in the short to medium term.
This study is a first of its kind in the Indian context – an objective, data-led demand supply analysis of the current state of A-Grade leasehold office space markets in India in the top seven Indian cities (Bangalore, Delhi NCR, Chennai, Hyderabad, Kolkata, Mumbai and Pune).
According to Ankur Srivastava, Managing Director, DTZ India, “Our city-level demand supply analysis, seen in conjunction with the macro-economic fundamentals, clearly indicates that office space rentals in India are likely to hit a plateau in the next six to twelve months. Barring a few exceptions (primarily the CBDs), the oversupply situation will lead to a correction in office space rental in India values. Or very simply, this correction in A-Grade office space rental values will not be driven by a lack of demand but due to the oversupply build-up.”
- The IT/ITES sector will continue to be the primary driver behind A-Grade leasehold office space sector, comprising around 70% of office space demand. Financial services, biosciences and pharmaceuticals will be the other significant contributors to the forecasted demand for AGrade leasehold office space

There are various factors that will define the degree and timing of this rental value correction For e.g. the threshold for this correction has been brought closer by the two recent interest rate hikes. DTZ has, therefore, deliberately refrained from commenting on either the extent or timing of this forecasted correction in A-Grade office space rentals in India.
That notwithstanding, DTZ firmly believes that the real estate India markets are entering their next phase/wave of evolution. The Indian real estate cycle saw its last crest in 1995-96 and the following years saw real estate values come down across the country. This correction also marked the first wave of evolution of the Indian real estate markets. The prime drivers of this change were the large foreign occupiers / corporates and IT firms that were establishing their presence in India and the most pronounced impact of this wave was a complete redefinition of what constituted A-Grade office space in India.

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