Delhi NCR dominate office leasing market with 47% share
Dec 19, 2017
Source Hindustan Times
Despite the note ban, India’s office market witnessed an all-time high annual absorption of over 43 million sq ft in 2016, registering a growth of 9% on a year-on-year basis. Supply addition during the year touched 35 million sq ft with India’s office stock reaching a milestone of over 0.5 billion sq ft (as of quarter 4, 2016) higher than several east Asian economies, says CBRE’s latest India Office MarketView Report – Quarter 4, 2016.
Leasing during the quarter was mainly led by Bengaluru and Delhi NCR, accounting for more than 50% of the total traction, followed by Pune and Mumbai. Quarterly leasing almost doubled, with Gurgaon continuing to lead leasing activity in the NCR, constituting a share of 61%. Rents across micro-markets remained stable with the exception of DLF Cyber City and leasing activity occurred mostly in the form of small-to-medium sized transactions (10,000 – 50,000 sq ft), says the report.
Pre-leasing activity rose on a quarterly basis, with more instances reported in Gurgaon, Bengaluru and Hyderabad. Similar to the previous quarter, pre-let activity was driven mainly by IT/ITeS and BFSI (banking, financial services, and insurance) occupiers booking space in properties scheduled for completion in the coming quarters. Owing to lack of quality office spaces with larger floor plates in completed developments, several under-construction projects (particularly in peripheral micromarkets) attracted an increased number of enquiries. There were few pre-leases also reported in other cities, including Mumbai, Noida and Kolkata. Throughout 2016, there was about 78% of 10 million sq ft of pre-leasing activity on a quarter-to-quarter basis.
Meanwhile, an analysis by research and real estate intelligence service JLL India says that the NCR alone contributes about 41% to total pan-India vacant stock of 72 million square feet, followed by Mumbai contributing about 28%.Bengaluru, the second biggest office market in size after Mumbai, contributes just 4.2% to pan-India vacant stock. The analysis also says low vacancy levels in many Indian cities and the rising demand for high-quality Grade A space is likely to drive up average rents, but at varying degrees for different sub-markets. For instance, sub-markets such as the Secondary Business Districts (SBDs) of Bengaluru and Pune, and Hi-Tech City in Hyderabad are expected to outperform the average, with rent growing 4 to 6% year-on-year in the medium term (2017-18). Meanwhile CBDs of all cities, suburbs such as MG Road, Greater Noida in the NCR, Salt Lake in Kolkata among others, will see stability or a negligible rent rise of 0-1% in the same forecast period.