Flexible workspace operators gain momentum in 2018, accounting for 13% of pan-India leasing volume: Colliers Research
Approximately 11.4 million sq ft (1.02 million sq m) of gross absorption of office take-up in India has been recorded in the first quarter of 2018, an almost 23 percent year-on-year increase.
Bengaluru continued to account for the highest share of absorption at 34%, followed by the National Capital Region (NCR) at 26%, Pune at 16%, Mumbai at 10%, Chennai at 9%, Hyderabad at 4% and Kolkata at 1%, a report by Colliers Research says.
"The technology and finance sectors remained the major contributors to office demand across Indian cities with 36% and 17% shares respectively of the total office take-up in Q1 2018. In line with our earlier forecasts, demand from flexible workspace operators and the manufacturing sector has started gaining momentum in 2018, accounting for 13% and 12% respectively of pan-Indian leasing volume. We foresee demand for flexible workspaces further increasing over the coming years", says Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.
"Although more than 30 million sq ft (2.7 million sq m) of Grade A supply is scheduled for completion in 2018; in our opinion, developers should adhere to the planned timelines to maximise the benefit of the present supply crunch in technology-driven cities. Developers should gear up to build future-proof buildings with up-to-date amenities and maximum technology intervention to command premium rents. We advise large occupiers looking for state-of-the-art buildings with modern amenities and facilities for their employees to pre-commit in advance, especially in low vacancy markets such as Bengaluru, Pune and Hyderabad," says Surabhi Arora, Senior Associate Director, Research at Colliers International India.
Office leasing momentum in the first quarter of 2018 remained robust driven by primarily by expansions. Bengaluru's total absorption in the first quarter of 2018 stood at 3.9 million sq ft, up by 7 percent year-on-year. We expect the absorption to pick up pace in the coming quarters as various medium-to-large sized transactions should be concluded in 2018.
In line with our earlier prediction, flexible workspace continued to flourish due to high demand in the CBD and Off-CBD areas. We expect the trend to pick up due to lower vacancy levels in strategic locations such as the CBD, Off-CBD and SBD areas.
NCR accounted for 26 percent of the total office absorption pie in India, next to Bengaluru at ~2.99 million sq ft in the first quarter of 2018.
In Gurgaon, demand for office space has regained momentum and the overall gross office uptake stood at 1.72 million sq ft (0.16 million sq m) in the first quarter of 2018. Expansionary office space requirements primarily drove the leasing demand. Occupiers' interest remained tilted towards Grade A buildings. However, occupiers were exploring options in Off-CBD micro-markets such as Sohna Road and Golf Course Extension Road to consolidate and optimise their real estate portfolio.
In Delhi, leasing activity remained subdued during the first quarter of 2018, as only 0.26 million sq ft of gross absorption was recorded marking a 21 per cent decline year-on-year. The reduction in the absorption levels can be attributed to the limited Grade A space in key micro-markets like the CBD and Aerocity as well as higher rents in Grade A and well-located buildings.
The Noida commercial market witnessed a spike in occupier interest during the first quarter of 2018. The market recorded about 1.01 million sq ft of gross absorption which was almost double than the first quarter of 2017 absorption levels. Noida continues to be a favoured destination amongst technology occupiers accounting for 25 percent of total absorption, followed by financial sector at 20 percent, engineering and manufacturing sector, with 19 percent and the healthcare and pharma sector accounting for 8 percent.
MumbaiGross absorption in Q1 2018 amounted to 1.1 million sq ft in Mumbai. Although about 37 per cent year-on-year decline was noted in absorption, Colliers witnessed several high-value outright purchases indicating continued investor confidence in the Mumbai office market. Notable transactions included the purchase of 60,000 sq ft (5,575 sq m) by Manappuram Finance in Wallstreet in Andheri. Also, Mahindra & Mahindra purchased two floors in Worli-based Mahindra Towers. The demand was driven by the financial sector, accounting for about 28 percent of the gross absorption followed by flexible workspace on 19 percent, engineering and manufacturing on 14 percent, healthcare on 13 percent and others on 26 percent.