Steady economic growth, a favourable policy environment, global occupiers increasingly preferring Indian offices, and the listing of the first Real Estate Investment Trust (REIT) in the country put India's office market on a growth path with a 21 percent growth year-on-year during the first half (H1) of 2019,says a report.
The net absorption across top seven cities touched nearly 22 million sq ft, and is expected to record a new high of 42 million sq ft by the end of 2019, according to the half yearly update (H1 2019 – January to June 2019) by JLL India.
A ramp-up by co-working players (15 percent of overall leasing) and occupiers in the IT/ITeS space (37 percent of overall leasing) drove the strong growth in demand, it added.
As per the update, Hyderabad saw a significant surge with net absorption multiplying almost four times as compared to the corresponding same period last year to 5.8 million sq ft in the first half of 2019 from 1.5 million sq ft in the first half of 2018. This pushed the share of Hyderabad to around 27 percent in the first half of 2019, up from 8 percent during the same period last year.
Strong expansion plans of IT/ITeS, BFSI and co-working occupiers amidst sturdy business confidence have also led to the growth. Bengaluru’s position remained unparalleled with a share of 30 percent. The city reported 6.5 million sq ft of net absorption during H1 2019.
Hyderabad has seen a massive rise in demand. The net absorption in the city is expected to almost touch the levels of Bengaluru by the end of 2019. Delhi-NCR is anticipated to make a strong comeback during the year, with net annual absorption likely to rise by 22 percent, the report said.
“The current business scenario offers a favourable expansion environment to occupiers. Moreover, it also offers investors the option to look at maximizing their returns through investment into completed properties under REIT. " The REIT listings by the Embassy-Blackstone Group Company clearly suggests that the commercial real estate in the country has matured and evolved in the past decade, following the global financial crisis.
"However, there is still a dearth of investment-worthy properties in the country. As a result, developers are focusing on increasing the supply of Grade A properties. We expect the momentum to remain robust in the second half of 2019 too,” said Ramesh Nair, CEO and country head, JLL India.
New completions
As per the update, 2019 will also set a new benchmark in terms of new completions, which is expected at about 47 million sq ft. Hyderabad is likely to lead on new completions at 13 million sq ft in 2019, with Bengaluru and Delhi NCR in the tow, it said.
“This clearly indicates that quality supply will continue to draw in occupiers, willing to pre-commit especially in cities like Bengaluru and Hyderabad, where vacancies continue to remain tight and in single digits,” said Samantak Das, Chief Economist and Head of Research snd REIS, JLL India.
New completions to the tune of 24 million sq ft was witnessed during the first half of 2019, and registering a robust growth of 16 percent year-on-year. Bengaluru accounted for the largest share in terms of new completions at 35 percent, it said.
This was followed by Hyderabad, which saw nearly 5.5 million sq ft of new completions, forming 23 percent of the overall new supply across the top seven cities. At the same time, Delhi NCR also constituted nearly 23 percent of the new completions at 5.7 million sq ft.
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