Is It Beneficial To Invest In Office Space In 2025 ?
The Indian real estate market is expected to grow at a CAGR of 21 percent during the forecast period of 2024-2032. In this rapid growth, commercial real estate is playing a significant role due to the increased number of businesses and industries, with office spaces contributing notably.
Recent data from the past three years shows that the net absorption of office space was 38.25 msf in 2022, 42.02 msf in 2023, and a record peak of 49.56 msf in 2024. This data indicates that the YoY growth of office spaces is increasing at an approximate pace of 14 percent per year.
With such strong growth, many investors and general buyers are considering investing in office spaces in India. But the question remains: will this trend continue in 2025, or will the growth slow down? Let's evaluate.
Economic Growth and Demand for Offices
India’s economy is rapidly evolving from being dependent on agriculture to becoming a major manufacturing hub and service provider. We are growing at a rate of 7 percent per year, leading to the establishment of more industries and, due to the large population, a major market for businesses.
As businesses grow, so does the demand for office spaces to support these enterprises and logistics. However, this demand is not uniform across all cities, as 80 percent of this demand comes from major business districts like Noida, Gurugram, Bengaluru, Chennai, Hyderabad, and Mumbai.
Why is a major fraction of demand coming from these cities?
A business requires good connectivity, transportation, and logistics hubs. In the case of retail shops, good footfall and a high-spending demographic are also essential. These aspects are only found in some of the top urban areas.
Noida, in particular, has emerged recently as one of the most in-demand cities for commercial investment due to its well-planned development and the upcoming Jewar Airport project.
Reports from JLL, CBRE, and Knight Frank show that the demand for office spaces surged by 30 percent in Noida in 2024. This growth is a result of Noida’s meticulously planned development, excellent connectivity, and the latest major developments, which are attracting huge commercial investments and pushing up rental prices.
Shift in Work Culture
During the COVID-19 pandemic, many businesses that had been working as service providers switched to remote work. However, due to inefficiency and loss of productivity, companies have had to call employees back to the office. This shift has contributed to the surge in demand for office spaces.
Additionally, the co-working culture has gained momentum as emerging entrepreneurs and small business owners look for affordable and quiet spaces to work. This growth in co-working spaces has further boosted the demand for office spaces.
Challenges with Office Space Investment
In some cities, an oversupply of office spaces has led to a potential decrease in appreciation and rental income. In certain areas, the work from home culture remains prevalent, which has dampened demand.
However, in Noida, the work from home trend is not as widespread, which is why the demand for offices is high. Developers are continuously introducing new projects. Recently launched projects like Splendor Onyx Blue, Bhutani Cyberthum, and One FNG have seen great demand and appreciation.
For smaller investors or buyers, managing and renting their office space can be challenging. However, in areas like Noida, Commercial Noida is available to help manage and rent properties effortlessly, ensuring attractive rental returns.
These challenges could impact your investment if you don’t choose the right location, such as Noida or Gurugram. Notably, news from various reputable sources indicates that only Delhi-NCR has seen an increase in appreciation compared to other major Indian cities.
Is It Beneficial to Invest?
Investing in office spaces in 2025 is a great opportunity because India’s economy is growing rapidly, with more businesses opening each year. This growth drives high demand for office spaces, particularly in major cities like Noida, Gurugram, and Bengaluru, where companies seek good infrastructure, transportation, and connectivity.
In 2024, office space usage hit a record high, growing by 14 percent compared to the previous year. Noida is especially attractive due to its planned development and the upcoming Jewar Airport. The rise in co-working spaces and the return of employees to offices after COVID have further boosted demand.
Projects like Bhutani Cyberthum and One FNG are particularly popular. However, it's important to choose the right city, as demand varies. Cities like Noida offer better returns and make managing rentals easier, making them a smart choice for investment.
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