Leasing activity rose by more than 10% in key Indian cities

Leasing activity rose by more than 10% in key Indian cities
17/07/2018 , by , in News/Views

South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its latest India Office Market View – Q2 2018 report. According to the report, the Indian economy struck a high note with a two-year high of 7.7% during the quarter ended March 2018. The upward momentum was largely attributed to the construction and manufacturing sectors, which grew by 11.5% and 9.1% respectively. Office leasing activity across India’s top 9 markets rose by more than 10%, with leasing crossing 20 million sq. ft. during the first half of 2018. Bangalore along with Delhi-NCR, Hyderabad and Mumbai led the leasing activity.

About 16 mn sq. ft. of supply added – an increase by more than 40% in H1 2018, when compared with H1 2017. Four cities – Bangalore, Mumbai, Hyderabad and Delhi-NCR – accounted for more than 80% of this supply addition, followed by Chennai.

Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “Corporates are likely to remain cost-sensitive, develop workplace strategies for efficient space utilization, which will impact the office space absorption. We foresee pre-commitments in quality, cost-effective projects nearing completion which will have a significant impact on office leasing activity across key cities.”

TECH & CO-WORKING ARE THE STRONG DRIVERS

Tech corporates (with a share of 31%) drove office space take-up in the country during Q2 2018. They were followed by co-working/business center firms (17%), owing to the continued expansion of key co-working operators across almost every major city of the country. These operators took up both primary and secondary spaces in primarily core locations. Other sectors such as banking, financial services and insurance (BFSI) (14%), engineering and manufacturing (8%), and e-commerce (6%) also contributed to the increase in leasing activity.

The share of the tech sector declined from 33% to 28% on a half-yearly basis, in comparison of H1 2018 with H1 2017. The decline was offset by the rise in the share of the other sectors. The share of co-working / business center operators doubled from just 5% in H1 2017 to about 10% in the review period. In addition, e-commerce firms remained active, with their share rising from 2% in H1 2017 to about 10% in H1 2018.

Commenting on the findings of the report, Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia Pvt. Ltd. said, “Office leasing activity is expected to remain stable in the short term, backed by corporates looking to expand or consolidate their operations. Across all cities, rising traffic congestion and public infrastructure have become key decision-making parameters significantly impacting location strategies of occupiers. We expect infrastructure initiatives (such as completion of highways and introduction of Mass Rapid Transport System (MRTS) services, etc.) to significantly influence and drive occupier preferences in the coming quarters.””

SMALL-TO-MEDIUM-SIZED TRANSACTIONS (LESS THAN 50,000 SQ. FT.) DOMINATED SPACE TAKE-UP

Continuing the trend, office space take-up was dominated by small- and medium-sized transactions. Small-sized transactions (less than 10,000 sq. ft.) accounted for about 44% of the transaction activity in the quarter, while mid-sized transactions (ranging between 10,000 sq. ft. and 50,000 sq. ft.) held a 42% share. The share of large-sized deals (greater than 100,000 sq. ft.) rose marginally from 4% in the previous quarter to about 5%.

Bangalore, followed by Delhi-NCR, dominated large-sized deal closures, with a few such deals reported in Hyderabad, Mumbai, and Pune. Sectors such as technology, co-working / business centers, e-commerce and engineering and manufacturing dominated large-scale deal closures. Key transactions included space take-up by corporates / operators such as Atlassian, Genpact, Landis+Gyr and Smartworks.

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