Office space absorption across all the leading cities noted double digit growth

Office space absorption across all the leading cities noted double digit growth in Q2, 2016 – CBRE Report

·        Approx. 3.2million sq. ft. of office space occupied in Q2 2016 (Rise of 48% Q-o-Q)

·        Corporate space absorption reached more than 10 million sq. ft. (Rise of 46% Q-o-Q)

·        Supply addition remained strong in second quarter, declined by only about 10% q-o-q

·        IT firms accounted for 45% office space take up, followed by engineering, manufacturing & BFSI firms  USA originated companies occupied 47% of total new office space in 2016

Chennai: 

According to the latest CBRE quarterly report on Indian office occupancy, corporate space absorption in the country has grown by 46% in Q2, 2016, to reach more than 10 million sq. ft. The leasing activity was led by the NCR and Bangalore, which accounted for almost 50% of the total space take-up in Q2 2016. Meanwhile, the Hyderabad and Mumbai market together accounted for more than 65% of supply addition in the quarter.

Commenting on the findings of the report, Mr. Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia Pvt. Ltd. said, “The Indian economic growth story is to continue, numerous policy initiatives likely to boost the investment sentiment. In the second quarter, we have witnessed healthy levels of office leasing activity across key cities, while/as supply addition in the second quarter remained strong. Also, government’s decision to relax FDI norms for several sectors, allowing REITs and the newly enacted Real Estate Regulation and Development Act (RERA) 2016, will further enhance the flow of global capital into the country. Or Also, government’s recently promulgated/announced progressive legislative reforms will further enhance the flow of global capital into the country.

Anshuman Magazine, Chairman
 and Managing Director of CBRE,
South Asia Pvt. Ltd

Suburban and peripheral office districts of major cities attracted steady occupier demand in last quarter. Prominent micro-markets which dominated leasing activity across cities during the quarter were Whitefield and Electronic City in Bangalore; NH-8 and DLF Cyber City in Gurgaon; Mount Ponnamalle Road in Chennai; IT Corridor in Hyderabad; Thane and Navi Mumbai; Hinjewadi and Kharadi in Pune; and Salt Lake Sector V in Kolkata.

Supply additions were witnessed along the IT and Extended IT Corridors in Hyderabad; Thane, Kurla and Bandra–Kurla Complex (BKC) in Mumbai; Salt Lake Sector-V in Kolkata; Sohna Road and Extended Golf Course Road in Gurgaon, and the Expressway in Noida; Electronic City in Bangalore; and Guindy, and Vadapalani in Chennai. Supply rationalization continued in certain emerging micro-markets, mainly due to developers waiting for occupation certificates or in anticipation of pre-commitments/occupier interest in under-construction developments. Vacancy levels dropped across most cities including Delhi NCR, Chennai, Hyderabad, Pune and Bangalore — with the exception of Mumbai and Kolkata, which witnessed a marginal increase during the quarter.

A closer look into the demand-supply dynamics on a half-yearly basis revealed about 17 million sq. ft. of corporate real estate absorption across the leading cities in H1 2016. In the case of supply, delays in completion led to development completions falling by about 15% in the first half of the year as compared to H1 2015, reaching to about 14 million sq. ft. While supply completions were dominated by the top three cities of Bangalore, NCR and Mumbai in H1 2015, rationalization in NCR and Bangalore in particular led to Hyderabad, Mumbai and Kolkata driving development completions during the first half of 2016.

“Corporate occupier demand for office space is expected to continue to grow in the forthcoming months, with IT/ITeS, banking / financial services and manufacturingfirms are likely to remain the major demand drivers. Most of the upcoming supply is concentrated in key micro-markets of the major cities. We expect these projects to see some traction from pre-leasing activity in the coming quarters.” said Mr. Ram Chandnani, Managing Director – Transactions & Assets Services, CBRE South Asia Pvt. Ltd.

Ram Chandnani, Managing Director –
Transactions & Assets Services,
CBRE South Asia Pvt. Ltd

The Central Business Districts (CBDs) of several cities witnessed change in rental values, with the exception of Delhi NCR, Mumbai and Pune.In the case of Bangalore, Chennai and Hyderabad, CBD rental values increased by about 2-6% q-o-q due to sustained demand levels. 

Also, the limited upcoming SEZ supply led to a q-o-q rental increase of 2-12% in SEZ developments across Chennai, Pune, Hyderabad and Kolkata. The same trend was reflected in IT (rental increase of 2-5%)and non IT(rental increment of 3-9%)developments across the micro markets of Gurgaon, Pune, Hyderabad, Bangalore and Chennai.

Share: