The first quarter of 2015 has started on a slow note with total office space take up at around 5 million sq ft in Q1 2015, registering a decline of 22 per cent year-on-year and 50 per cent quarter-on-quarter, according to real estate consultancy firm CBRE.
CBRE’s India Office Market View reports on the status of grade A office space across country’s leading cities on a quarterly basis.
The corporates were still strategising their real estate plans for the rest of the year and therefore fewer transaction decisions were implemented during the quarter, the report said as a possible reason for the apparent drop in the demand.
On the demand side, Mumbai led the transactions with 26 per cent share followed by Delhi-NCR (20 per cent) and Bangalore and Pune (around 18 per cent each).
Anshuman Magazine, chairman and managing director, CBRE, South Asia Pvt Ltd, said, “Demand for prime office space is expected to pick up in forthcoming months as occupiers implement their business plans across cities. The quantum of pre-commitments made during the first quarter is likely to boost space take up, going forward.”
He noted that an emerging trend which is likely to gain momentum is that of tier II cities, such as Chennai and Hyderabad, attracting demand for bespoke solutions from large corporate occupiers for their real estate requirements.
The top cities saw supply of more than 8 million sq ft investment grade office space during the quarter, registering an increase of 4 per cent on quarterly basis. Out of this, Delhi NCR alone contributed 53 per cent towards total supply.
Subdued demand coupled with significant supply led to an increase in vacancy level in Delhi-NCR whereas vacancy level was seen dropping in Mumbai and Bangalore during the quarter.
Industry sectors such as IT/ITeS and banking, financial services continue to remain the main drivers for office space with a share of around 44 per cent of total leased space while engineering, manufacturing, e-commerce, telecommunications and pharmaceuticals also play an active role in commercial real estate.
E-commerce, which has emerged as an important segment for office space, accounted for 7 per cent of total transaction activity, with Mumbai, Bangalore and Gurgaon getting the maximum attention.
Rentals remained largely stable across most centralised office locations, with only exception being Bangalore which saw rentals appreciating by 5–6 per cent quarter over quarter in core office locations due to strong demand. Select micro-markets in Gurgaon, Bangalore, Chennai and Pune also saw appreciation of 5-6 per cent in rentals.
(Edited by Joby Puthuparampil Johnson)