Bengaluru led the leasing activity with a 30 percent share of gross leasing in H1 2019, followed by Delhi-NCR and Hyderabad, with a share of 18 percent and 16 percent, respectively
The top seven cities in India recorded office space gross absorption of 24.4 million sq ft in the first half of 2019, a two percent increase from last year. Demand was driven by the technology sector and flexible workspace operators, a new report stated.
Bengaluru led the leasing activity with a 30 percent share of gross leasing in H1 2019, followed by Delhi-NCR and Hyderabad with a share of 18 percent and 16 percent, respectively. Between 2019 and 2023, the average annual gross absorption of 50.3 million sq feet is forecast, outpacing the annual average gross absorption of the preceding five-year period by about 18 percent, a new report by Colliers Research reveals.
Over 2019-23, technology, pharmaceutical, engineering and manufacturing occupiers are expected to drive demand. Demand for leasing in 2019 is likely to be marginally lower by 1.5 percent than last year’s record levels. However, demand should touch a new high in 2023, led by Bengaluru, Delhi-NCR and Hyderabad, it added.
Demand is expected to be driven by Information Technology-Business Process Outsourcing (IT-BPM) occupiers, as well as pharmaceutical, engineering and manufacturing companies for their global in-house centres, it said.
Between 2019 and 2023, total new supply is estimated to rise 112 percent from the preceding five years and should average 61.3 million sq feet, it added.
In south India, gross absorption in H1 2019 was recorded at 7.4 million sq ft, a marginal decline of three percent year-on-year. The city’s traditional office demand driver, the IT-BPM sector, accounted for about 30 percent of the total leasing volume, down from a 45 percent share in the first half of 2018, due to consolidation and increasing take-up by flexible workspace operators, the report said.
Bengaluru’s new supply doubled as compared to the first half of 2018, with an addition of 8 million sq ft in the first half of 2019. From 2019 to 2023, Bengaluru’s stock is expected to increase by around 39 percent, a supply addition of around 65 million sq ft.
“We forecast the ORR micro market to account for the largest quantity of supply, 31 percent through 2023. In the light of declining vacancy levels, we recommend occupiers pre-commit to space in preferred locations of ORR and Whitefield to leverage current rental levels. We also expect continued demand from the technology sector and flexible workspace operators to drive leasing in Bengaluru over 2019-23. By the end of 2023, we expect vacancy levels to decline to four percent led by robust leasing by sectors such as technology and flexible workspace operators,” Arpit Mehrotra, Senior Director, Office Services (Bengaluru & Hyderabad) at Colliers International India, said.
In the first half of 2019, gross leasing activity in Delhi-NCR stood at 4.4 million sq ft, which is 28.1 percent lower than the first half of 2018. During the first half of 2019, NCR witnessed pre-commitments totalling 1.4 million sq ft across Gurugram and Noida, signifying robust occupier confidence in the market.
Across NCR, demand was driven by IT-BPM occupiers, which accounted for 20 percent of total gross leasing in the first half of 2019, followed by flexible workspace operators, which accounted for about 17 percent of total leasing.
“Despite decline in gross office leasing activity in the first half of the year, we expect the leasing momentum to gather pace with over 10 million sq ft of gross absorption expected by end of this year. Interestingly, the market has seen 15 percent increase in large ticket size transactions of 100,000 sq ft and above compared to the first half of 2018, driven by notable transactions in the NOIDA market. The increased occupier confidence in the market is also signalled by a total of 1.4 million sq ft of pre-commitments across Gurugram and Noida during H1 2019,” said Vineet Anand, Senior Director, Office Services (NCR) at Colliers International India.Mumbai recorded gross absorption of 3.9 million square feet in the first half of the year, up nine percent YoY. A notable increase of 51 percent in new supply compared to the first half of 2018 maintained leasing momentum through H1 2019. Various micro markets, namely Navi Mumbai and Thane, are expected to see increased tractions from technology occupiers owing to upcoming supply and relatively attractive rents compared to other micro markets across the city, the report said.The Great Diwali Discount!
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