Meanwhile, new office space supply witnessed a sharp decline of 32% year-over-year (YOY), with only 17.4 million square feet completed in H1 2024. This limited supply, coupled with increased transaction activity, led to a decrease in the overall vacancy rate. By the end of June, the vacancy rate had dropped to 15.9%, down from 18.0% in the previous year.

?The return of employees to physical offices has spurred office demand across all occupier segments, including tech. The demand momentum is expected to continue through the second half, with the year anticipated to see new record absorption levels of 65-66 million square feet in 2024. We expect strong leasing activity from the tech, BFSI, flexible workspace, and manufacturing sectors," said Naveen Nandwani, MD, Commercial Advisory and Transactions, Savills India.

Leasing activity in Q2 2024 reached 17.2 million square feet, reflecting a slight decrease of 2% compared to the previous quarter. However, new office space supply surged by 64% quarter-on-quarter to 10.8 million square feet. Bengaluru maintained its position as the top contributor to national leasing activity in the first half of 2024, accounting for 28% of the market. Mumbai and Hyderabad followed closely behind with shares of 18% and 16%, respectively.

Mumbai's office market has shown a remarkable revival since the second half of 2023, with significant growth. The technology sector led the leasing activity, taking up 39.3% of the total space absorbed. The banking, financial services, and insurance (BFSI) sector followed at 16.9%, and flexible workspaces captured 13.9%. Notably, Mumbai stands out as the only city to witness a YoY increase in new office space supply during the first half of 2024, while all other cities saw a decrease in new supply compared to the same period last year.