Commercial office space demand grew 18 percent to 23.4 million sq ft during January-September. Bengaluru has seen the highest absorption at 7.9 million sq ft, followed by Mumbai (4.2 million sq ft) and Delhi NCR (4 million sq ft), a JLL report stated.
The three cities contribute almost 70 percent of absorption across India. Growth was driven by strong economic fundamentals, demand for quality grade A office space, institutional investments in commercial office assets and the co-working office trend catching up in key markets, it said.
Demand for office space in these cities has been primarily driven by sectors such as IT-ITeS, banking and insurance, manufacturing and consultancy service. e-commerce and co-working service providers are also contributing to demand for office space.
For 2019, JLL sees a 16 percent year-on-year growth in net office space demand to over 33 million sq ft. Demand in the top seven markets -- Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata -- is pegged over 37 million sq ft.
Around 126 million sq ft of supply is expected over the next three years in the event of new project launches across markets, the report said.
In percentage growth terms, Chennai saw a 92 percent increase in office space absorption at 2.3 million sq ft, followed by Pune, which saw a 50 percent YoY growth at 2.1 million sq ft. Hyderabad and Kolkata saw demand of 2.2 million sq ft and 0.7 million sq ft, respectively. An increase in transaction volumes by December-end for these cities is also expected, it said.
On the rentals front, markets like Mumbai and Delhi-NCR have seen stable and realistic growth. Rentals in Bengaluru, Pune, Chennai and Hyderabad have crossed the peak levels they had attained in Q3 CY08, just before the beginning of the economic slowdown.In terms of vacancy for grade A office space, cities like Bengaluru, Hyderabad, Pune, and Chennai are all in single-digits. Demand was traditionally driven largely by IT and IT-SEZ occupiers, but of late, there is an increase in the share of non-IT office developments in cities that have been traditional IT hubs, the report added.