Bengaluru Positioned to Dominate India’s Commercial Real Estate with 340 Million Sq Ft of Office Space by 2030

Bengaluru Poised to Lead India's Commercial Real Estate Market with 340 Million Sq Ft by 2030

Bengaluru, India's premier IT hub, is on a trajectory to cement its status as a leader in the nation’s commercial real estate sector further. A recent report by the Confederation of Indian Industry (CII) and CBRE projects that the city's office space inventory will soar to 330 and 340 million square feet by 2030, reinforcing its pivotal role in shaping the country’s commercial property landscape.

Reaching New Heights

The report, *'Karnataka Horizon: Navigating Real Estate Excellence in the South,'* was released in Bengaluru on July 10, spotlighting the city’s extraordinary growth. As of June 2024, Bengaluru’s office space had expanded to over 223 million square feet, a remarkable increase from the 100 million square feet recorded in 2013. This growth has positioned Bengaluru as the unrivaled leader in India's commercial real estate, outpacing all other major cities.

Currently, Bengaluru accounts for 25% of the country’s total office space, which stood at 880.7 million square feet as of mid-2024. This achievement is particularly notable considering the city’s steady annual absorption rate of 15-16 million square feet over recent years.

Future Expansion

Looking ahead, Bengaluru’s commercial real estate market is expected to grow significantly, particularly in its peripheral areas. The availability of vast land parcels and the development of new infrastructure projects are likely to drive expansion, especially in the northern, eastern, and southern regions of the city.

Anshuman Magazine, Chairman and CEO of CBRE India, Southeast Asia, the Middle East, and Africa, highlighted the importance of these developments, stating, "Bengaluru is set to experience substantial growth in its peripheral regions. With large land parcels available and numerous infrastructure projects in the pipeline, the commercial sector is poised for significant expansion in the northern, eastern, and southern areas."

Sectors Fueling Demand

As Bengaluru approaches 2030, several key sectors are expected to drive the demand for office space. The technology, engineering, manufacturing, and BFSI (Banking, Financial Services, and Insurance) sectors are anticipated to be the primary contributors to this growth. Additionally, emerging industries such as life sciences, aviation, and the automotive sector are also expected to play a role in increasing demand.

Currently, the technology sector leads the way, accounting for 30-35% of Bengaluru’s annual office space absorption, particularly in key commercial hubs like Outer Ring Road and Whitefield. The report also highlighted the city’s dominance in attracting global capability centers (GCCs), with Bengaluru capturing a 41% share of this market between 2022 and June 2024. This success is attributed to the city’s skilled talent pool, high-quality Grade-A office spaces, and a well-established IT ecosystem.

Ram Chandnani, Managing Director of Advisory and Transaction Services at CBRE India, emphasized the need for continued innovation in Karnataka's tech infrastructure. He remarked, "To maintain its competitive edge, Karnataka's dynamic tech ecosystem must continue to evolve. Developing premium, sustainable tech spaces with state-of-the-art facilities will be crucial."

Challenges on the Horizon

While Bengaluru’s commercial real estate market is set for growth, it also faces significant challenges. Shailendra Naidu, Senior Executive Director for Advisory and Transaction Services at CBRE, identified several long-term issues that could impact the market. These include the ease of doing business, high land costs, and the efficient use of space. Naidu also pointed out that the prevalent joint venture model for land acquisition could pose challenges in the future. “Most development firms acquire land through joint ventures, a method that may present difficulties going forward,” he explained.

Bengaluru’s Retail Real Estate on the Rise

In addition to its commercial real estate success, Bengaluru's retail real estate sector is also experiencing notable growth. The city’s retail stock has more than doubled from 7.2 million square feet in 2013 to over 16 million square feet by June 2024, securing the second-largest share among Indian cities at 24%. Projections indicate that this figure could grow to 20-30 million square feet by 2030, reflecting a 1.4-fold increase.

Key industries driving this growth include entertainment, fashion and apparel, and homeware and department stores, each contributing 20-30% to Bengaluru’s annual retail space absorption. The city’s average annual retail absorption stands at 1.5-2 million square feet. Bengaluru's prominence in the retail sector is further highlighted by the fact that it is home to three of India’s 17 listed malls. This underscores the city’s appeal as a retail destination, catering to the evolving needs of its residents.

The Path Forward

As Bengaluru continues to expand its commercial and retail real estate markets, the city is well-positioned to remain a dominant force in India’s real estate landscape. Adapting to emerging trends, supported by robust infrastructure and a skilled workforce, will be key to sustaining this growth. However, addressing challenges related to land acquisition, space utilization, and the ease of doing business will be critical for long-term success. Bengaluru’s real estate market is set for a transformative decade, with significant opportunities for growth and development across both commercial and retail sectors. The city’s leadership in India’s commercial real estate market not only reflects its past achievements but also signals its potential for future success.