Net Absorption of Office Space Remains Steady

Net Absorption of Office Space Remains Steady
01/02/2017 , by , in News/Views, Realty Spotlight

Strengthening business confidences resulted in net absorption of office space across the top eight cities[1] to at 34 million square feet (msf) during 2016 according to international property consultants Cushman & Wakefield. Of the total uptake of office space, nearly 40% of the total net absorption took place in the last quarter of 2016. Bengaluru recorded the highest net absorption during the year, with Hyderabad surpassing Pune to emerge as the second-largest market in 2016. Delhi followed the two southern cities in terms of net absorption with activity witnessed in Gurgaon and Noida.

“The demand for office space, though similar to that seen in 2015 was better than market expectations, especially in the second half of the year. Despite many changes globally, that could change the course of business, India remained one of the most optimistic markets in the recent times. We expect this positive outlook to continue into 2017. In the new near, majority of the activities will be led by consolidation and expansion of businesses, we feel that it would be ideal to maintain the momentum of the market. Bengaluru has once again been the best performing market, and we expect the traction to continue. Investors and occupiers are keenly watching the Hyderabad market, where we see continued demand next year. Looking towards 2017, cautious expansion strategies by corporates, lower GDP growth due to demonetization and uncertainty in the global economy due to BREXIT and US political scenario, the first half of the year is likely to see slower growth in demand for office space ” Anshul Jain, Managing Director, India Cushman & Wakefield said.

The total leasing activities that took place in 2016 across the top eight cities amounted to 42.3 msf which was lower by 22% over the previous year. The top sector leading the total leasing table were IT- BPM at 52% of total space uptake in 2016. Bengaluru remained the preferred IT-BPM destination constituting 37% of the total leasing activity followed by Hyderabad at 26%. These were followed by Chennai and Delhi at 11% and 10% share respectively. Consulting services took up approximately 6% of the total office space leased while BFSI amounted for abnout 4% of the total leasing in 2016. Pharma & Healthcare constituted about 3.2% while E- commerce formed about 1.5% of the volume of office space leasing transactions in 2016. While all major sectors saw a slowdown in the total volume of transaction, Energy & Chemicals was one the only sector that recorded a rise in total leasing activities at approximately 53% growth y- o- y over the previous year.

Total supply of approximately 36.6 msf was infused during the year, with the last quarter accounting for 30% of the completions as developers, especially in Bengaluru received completion/occupancy certificates for their projects from local authorities. Developers scrambled to get their projects operational during the fourth quarter encouraged by the strong demand pipeline from occupiers.

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