Demand for office space surges 9% in Jan-Sept 2019
The top seven cities of India recorded gross leasing activity of about 40.1 million sq feet during Jan-September 2019, registering a 9% increase from the corresponding period last year. “A robust business support ecosystem continues to attract occupiers to expand their operations, despite the recent slowdown in the Indian economic growth. In Q3 2019 alone, gross absorption rose 9% to 13.9 million sq feet, from Q3 2018”, said Ritesh Sachdev, Head- Occupier Services, India and Managing Director, South India at Colliers International.
Developers rush to complete constructions
The Jan-September 2019 period witnessed 33.8 million sq feet of new completions, 53% higher compared to corresponding period last year. Hyderabad witnessed the highest completions during the period, at 11.9 million sq feet, accounting for 38% of the total supply across the cities. Bengaluru witnessed supply of 10.0 million sq feet, accounting for 30% of the total supply. Both the cities are witnessing sturdy demand, which is now well-backed by solid construction completions.
“This sturdy expansion by occupiers is likely to push up fresh take-up of office space in 2019. Gross absorption in 2019 is likely to exceed the levels seen in 2018 by 7-10%. IT-BPM and technology companies’ leasing accounted for 36% of the total leasing, again suggesting that the demand is becoming more broad-based. Flexible workspace accounted for 18% of the total gross leasing during Jan-September 2019. This is in line with our earlier estimates, wherein we forecast that flexible workspace leasing will account for 18-20% of total gross absorption in 2019,” says Megha Maan, Senior Associate Director, Research at Colliers International India.
Bengaluru tops office demand; Hyderabad pips Delhi-NCR to emerge to 2nd position
Bengaluru maintains the top position in office space leasing, with a share of 30% in gross leasing during Jan-September 2019. Bengaluru recorded gross absorption of 12.1 million sq feet during Jan-September 2019, a 7% increase from same period last year, as occupiers continue to ramp up. IT-BPM and technology companies together accounted for 36%. Engineering and manufacturing sector’s leasing accounted for 18% share. Occupiers are preleasing space, and even taking up space in refurbished grade B buildings, due to tight vacancies in the market amidst healthy demand. The city’s vacancy stood at 8.8% at the end of Q3 2019.
Hyderabad overtook Delhi-NCR to emerge as the 2nd position, in terms of demand, with a share of 19% in gross absorption. During Jan-September 2019, gross absorption rose 84% yoy to 7.5 million sq feet. Hyderabad is the fastest-growing commercial market, as occupiers remain enthusiastic about the pro-investment state government, whose policies support the quality infrastructure development in the city. The city witnessed supply of 11.9 million sq feet, more than a four-fold rise in supply. Despite the heavy supply, Hyderabad’s vacancy stood at 4.5% at the end of Q3 2019 as about half of the buildings that become operational were already pre-committed.
Delhi-NCR, which accounted for the third-highest demand, witnessed a 6% decline in gross absorption to 7.4 million sq feet.