Gross commercial leasing across 7 cities at 36.4 million sq ft in Jan-Sept
Gross leasing activity across seven Indian cities stood at 36.4 million square feet (MSF) for the first nine months of 2018, up 26 percent year-on-year. Bengaluru saw the maximum leasing activity followed by Hyderabad, which dethroned Mumbai to be the second most active market, a report by Colliers Research stated.
Pan-India demand for Grade A office space was driven by the technology sector (48 percent) in the Q3 CY18, followed by banking and insurance representing 19 percent of total leasing volume, it said.
“Despite the currency fluctuations, gross leasing activity in India across major seven cities rose 26 percent YoY in the first nine months of 2018. Bengaluru again saw the bulk (30 percent) of leasing activity during Q3 CY18 at 3.7 MSF, followed by Hyderabad, which replaced Mumbai to be the second most active market,” says Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.
The leasing activity in Hyderabad doubled over Q2 to 2.1 MSF owing to large transactions by technology occupiers in the secondary business district (SBD).
Flexible workspaces (co-working) contributed close to 13 percent of office leasing in Q3 CY18, reporting a growth of two times from last year Q3 leasing. This trend indicates that 2019 will be an even more active for the flexible workspace sector, fuelled by an increase in end-user demand from the IT industry, which is looking at ways to mitigate real estate costs and seeking flexible solutions, it added.
“India’s GDP growth should touch about 7.5 percent in CY18 and stay strong for several years. Firm growth should fuel expansion in property and attract investment. Between 2018 and 2021, we see average gross absorption of 46 MSF, exceeding average new supply of 41.2 MSF by 12 percent. This should push up average rents by 1.9 percent annually. Bengaluru should see the fastest growth, at 4.1 percent,” says MeghaMaan, Senior Associate Director, Research at Colliers International India.
Bengaluru recorded gross office absorption of 3.7 MSF in Q3 CY18, a growth of 55 percent from the same period last year. Total Grade A office leasing in the same period was 11.4 MSF.
Aiding the city’s real estate growth is steady demand from the technology sector that constituted 41 percent of total leasing activity in Q3 CY18. This was followed by the banking financial services and insurance (BFSI) sector at 27 percent of leasing activity and flexible workspace operators at 15 percent.
Hyderabad recorded 2.13 MSF of gross office leasing in Q3 CY18. Year-to-date gross absorption is 3.6 MSF, which is similar to 2017 levels. Considering the large-scale expansion plans of IT-ITeS occupiers, we see the demand outlook remaining firm towards 2018-end and expect momentum continuing over the next three years.
Mumbai recorded gross absorption of 1.9 MSF in Q3 CY18, a quarter-on-quarter increase of 11 percent. This was concentrated in Andheri East (25 percent), Navi Mumbai (18 percent), eastern suburbs (15 percent) and Goregaon/Jogeshwari–Vikhroli Link Road (12 percent).
For the second consecutive quarter, flexible workspace operators drove leasing activity in Mumbai, accounting for nearly 36 percent of gross absorption in Q3 CY18, followed by BFSI at 28 percent and consulting occupiers at 15 percent.
Leasing activity in Noida has gathered pace as technology occupiers and manufacturing companies lease space on the expressway. The market recorded gross absorption of 0.78 MSF in Q3 CY18. Compared to the same period last year, leasing has increased by 30 percent as the average deal size expanded three times to 70,874 sq ft.