Commercial gross leasing activity grew by more than 25 percent YoY to touch a historic high of almost 61.6 million sq ft at the end of 2019.
Bengaluru, followed by Hyderabad, Delhi NCR and Mumbai, dominated office leasing on an annual basis, together accounting for almost 75 percent of the overall space take-up, according to a report by property consultant CBRE.
The overall quantum of investment for 2019 reached about $6.06 billion, out of which more than 40 percent was in the office sector. Mumbai dominated investments in office in 2019, followed by NCR and Hyderabad, the report said.
More than 52 million sq. ft. of new office supply added in 2019; led by Hyderabad, followed by Delhi NCR, Bengaluru and Pune, says a report by ..
Demand in 2020 is expected to be in line with supply; mainly driven by Bengaluru and Hyderabad, the report said.
Development completions are likely to be concentrated in peripheral/ suburban micro-markets. However, Delhi NCR is likely to witness supply addition in core locations as well. It is also anticipated that landlord priorities would shift from just LEED certifications to delivery of International WELL Building Institute’s (IWBI) WELL Building Standard (WELL) certifications, the report said.
Rental growth expected to be driven by space quality
As new buildings become operational, residual spaces along with higher quality of new spaces are likely to drive rental growth across major cities. It is also expected that older developments would observe rental growth when they are appropriately refurbished and equipped with adequate amenities.
It is anticipated that rentals are likely to grow due to continued pre-leases in under-construction developments and limited availability of ready-to-move-in spaces. In cities such as Bengaluru, Chennai and Pune, sustained absorption in quality developments is likely to lead to tapered growth during the year. Strong demand for space in quality developments and planned infrastructure upgrades are likely to result in a marginal increase of 1-2% in rentals in core micro-markets.
Tech firms led India’s office leasing activity
In 2019, the share of the tech sector in overall space take-up rose from about a third in 2018 to almost 40 percent; with overall space take-up by such firms rising by more than 45 percent on an annual basis. This growth was primarily driven by global multinationals, which accounted for more than 70 percent of the overall space take-up by tech firms this year.
The share of research, consulting & analytics firms has increased to 5 percent in 2019 from 4 percent in 2018. The collective share of sectors such as engineering & manufacturing, BFSI, e-commerce and research, consulting & analytics, dropped from almost 36 percent in 2018 to 31 percent in 2019, the report said.
Several of these corporates continued to show interest in SEZ spaces despite the upcoming sunset clause deadline; as a result, SEZs accounted for about one-third of the leasing activity in 2019. Meanwhile, occupiers continued to opt for flexible spaces, with the share of the segment rising from 12 percent in 2018 to about 14 percent in 2019, the report said.
Rise in pre-leasing activity
Occupiers continued to future-proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. In 2019, more than 20 million sq. ft. of pre-leasing activity was recorded mainly in Bengaluru, Hyderabad, Pune and Mumbai.