With technology, BFSI and flexible workspace operators continuing to expand, total gross office leasing activity stood at 13.2 million sq ft during the second quarter of 2019, an increase of 10 percent from the corresponding quarter last year, says a report by Colliers Research.
The robust expansion plans of companies in these sectors led to fresh take-up of space. Net absorption amounted to 11.5 million sq feet, accounting for a massive 87 percent of total leasing activity during Q2, the report adds.
Occupiers remain bullish about the business environment in the country, as they continue to expand at a robust pace. On a quarter-on-quarter basis, net absorption increased by 10 percent, it said.
In terms of net absorption, Bengaluru accounted for the highest share in leasing at 28 percent during Q2, followed by Hyderabad and Delhi-NCR, which had a share of 24 percent and 18 percent, respectively.
In Hyderabad, increase in the number of technology and flexible workspace operators were well supported by 3.5 million sq feet of supply during the quarter. Occupiers continue to pre-lease space in Hyderabad as vacancies remain tight in preferred sub-markets in the city.
Vacancy in the city stood at 5.5 percent at the end of Q2 2019. In fact, more than 15 new companies entered the Hyderabad market in first half of 2019 from sectors such as tech, flexi spaces and pharma, the report said.
In Q2 2019, Delhi-NCR saw an increase of 63 percent in net absorption driven by tech (22 percent), healthcare and pharma (15 percent) and flexi space operators (12 percent). Noida is seeing rising occupier interest with a 38 percent share in gross leasing and an 11 percent increase over Q1 2018, the report said.
As far as new supply is concerned, the first half saw 23.2 million sq feet of new completions, 51 percent higher compared to the first half of 2018 led by cities Hyderabad and Bengaluru, which together contributed 72 percent to the total supply, the report said.
“While flexible workspace operators’ leasing was subdued during the quarter, operators are ramping up aggressively and this year is likely to see robust leasing by flexible workspace operators in Bengaluru. Occupiers are pre-leasing space, and even taking-up space in refurbished grade B buildings, due to tight vacancies amid healthy demand,” says Ritesh Sachdev, Head, Occupier Services, India and Managing Director, South India at Colliers International.
On a half-yearly basis, gross absorption touched 24.5 million sq feet, inching up marginally by 2 percent compared to same period last year.
“The leasing activity has risen by 17 percent compared to previous quarter indicating positive business sentiment as a result of re-election of the NDA government. During Q2, tech and IT-BPM companies continued their strong streak, accounting for 35 percent share. This was followed by the engineering and manufacturing sector and BFSI sectors with a share of 12 percent each. During the quarter, flexible workspace accounted for only 11 percent of leasing. However, they are expected to ramp up pre-leasing space for the future,” says Megha Maan, Senior Associate Director, Research at Colliers International India.