Office space in Bengaluru taken largely by AI and robotics companies in Q2 CY24

Bengaluru: AI and robotics companies accounted for 21per cent of Bengaluru’s office space absorption in the second quarter of this calendar year (Q2 CY24), as per workplace solutions firm Vestian’s quarterly office market report, released on Tuesday. 

Bengaluru contributed the highest to pan-India absorption with 25per cent share in Q2 2024. The city reported a quarter-on-quarter (QoQ) increase of 62per cent and a 15per cent year-on-year (YoY) rise. 

Overall, the IT-ITeS sector, including AI and robotics, accounted for 69% of the city’s absorption in Q2 2024. 

Bengaluru also dominated new completions with 28per cent share.

Southern cities (Bengaluru, Chennai, and Hyderabad) accounted for 57per cent of the total new completions reported in Q2 2024. However, the share has dropped from 63per cent a quarter earlier.

Rapid global advancement of artificial intelligence, combined with a supportive ecosystem, has significantly driven the demand for office space in the city, according to Vestian. 

IT-ITeS sector dominated absorption with 38per cent share in Q2 2024, followed by BFSI and consulting services at 12per cent and 10per cent respectively. Flex spaces accounted for 8% of the total absorption during the current quarter.

Absorption in India

January to June (H1) 2024 witnessed office space absorption of over 30 million square feet (msf) in India, registering an uptick of 18per cent YoY. The entire year is expected to cross the 60 msf mark again, after the record performance seen in 2023, as per Vestian. 

Absorption reached 17.04 msf in Q2 2024, registering a 23per cent YoY increase. The surge could be attributed to an improved global macroeconomic scenario and India’s growth amid global geopolitical challenges.

New completions also increased by 17per cent in H1 2024 over H1 2023, reaching 23.2 msf. Additionally, Q2 2024 witnessed a yearly rise of 10per cent. However, Bengaluru did not witness a QoQ uptick in construction activities unlike many other cities. 

Shrinivas Rao, FRICS, CEO, Vestian said, “Real estate activities are anticipated to increase further on the back of strengthened demand from IT-ITeS and BFSI sectors. Flex spaces are also likely to play a pivotal role in the growth of office markets in India.”

Retail growth

Bengaluru recorded an increase in retail leasing by 39per cent YoY across malls, and high-streets in H1 2024, real estate consulting firm CBRE South Asia announced in its report on Tuesday. Total leasing during H1 2024 stood at 1 msf compared to 0.8 msf in the corresponding period last year. 

During this period, in Bengaluru’s tenant sectors, fashion and apparel led with a 40per cent share, followed by food & beverage at 15per cent, and homeware and department stores with a 12per cent share.