Office space absorption up 46% in Q2: CBRE

The office space absorption across the top realty markets of India was over 10.2 million sq ft in the quarter ended June, 2016, up approximately 46% on a quarter-on-quarter basis, according to a report by real estate consultancy firm CBRE.

The take-up was led by Delhi National Capital Region (NCR) and Bangalore, which accounted for almost 50% of the total absorption, according to the CBRE report titled India Office MarketView – Q2 2016.

On the supply front, nearly 7 million sq ft of fresh office space came into the market during this period. Hyderabad and Mumbai together led supply addition, accounting for more than 65% of the total supply of fresh office space across leading cities during the quarter.

More than 17 million sq ft of corporate real estate was absorbed across the leading cities in H1 2016, translating to a marginal rise of 6% over that of H1 2015 when absorption stood at over 16 million sq ft, the report said. 

Anshuman Magazine, chairman and managing director of CBRE, South Asia Pvt. Ltd, said, “Despite a muted global economy, India continues to be a favoured outsourcing destination for corporate firms. Recent policy announcements by the government and a stable domestic economy are all expected to attract investments into the country’s real estate sector and enable the ease of doing business here.”

IT/ITeS continued to be the largest demand driver for office space, recording over 50% of the total leasing activity recorded in the quarter. This was followed by engineering and manufacturing firms and the BFSI sector. The e-commerce segment also saw a slight uptick in office space take-up of about 5% over 4% in Q1, 2016. This was led mainly by Hyderabad, Delhi NCR and Bangalore.

“The markets of NCR, Mumbai and Bangalore continue to lead the demand for corporate office space. Similar to the trend in previous quarters, occupier focus is likely to be concentrated towards prime micro-markets of leading cities. However, we are also starting to see a push towards the supply-laden peripheral locations of these cities. The main reason for this is the availability of cost-effective, investment-grade office space with large floor plates. The interest in these areas is expected to further increase, thanks to upcoming infrastructure. Space utilisation and innovative workplace strategies will play a large role in the expansion plans for occupiers,” said Ram Chandnani, managing director – advisory and transaction services, CBRE South Asia Pvt. Ltd.

Suburban and peripheral office districts of major cities also attracted steady occupier demand in this quarter. Prominent micro-markets that dominated leasing activity across cities during the quarter were Whitefield and Electronic City in Bangalore; Sohna Road and DLF Cyber City in Gurgaon; CBD (Anna Salai, T Nagar, RK Salai, Alwarpet and Nungambakkam), OMR Zone 1 and Mount Ponnamalle Road in Chennai; IT Corridor in Hyderabad and Thane and Navi Mumbai.

Except for Delhi NCR, Mumbai and Hyderabad, the Central Business Districts (CBDs) of Bangalore, Chennai and Pune saw a rental rise of about 2-6% quarter on quarter. On the other hand, Kolkata CBD witnessed a 4-6% quarter-on-quarter in rentals.

With limited SEZ supply expected in the market, this segment also saw a q-o-q rental increase of 2-12% 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 office markets in Gurgaon, Pune, Hyderabad, Bangalore and Chennai.

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