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Last Updated : | Source: Moneycontrol.com

Total gross co-working leasing volume in India touches 13 msf: Report

With a strong start across markets in 2019, leasing activity this year is expected to gain momentum with the already high demand for quality office spaces.

Moneycontrol News @moneycontrolcom

The total gross co-working leasing volume in India touched almost 13 msf during the first quarter of 2019, which is 1.45 times higher than the corresponding quarter, as per a report by Cushman & Wakefield India.

The growth was largely contributed by IT – BPM sector, supported by the expansionary activity of occupiers and with pre-commitments made towards quality office space supply especially in cities like Bengaluru, Hyderabad and Pune.

The emergence of space take-up in co-working/flex affirms that corporates are aligned to the mixed portfolio strategy of fixed and flex space going forward. Flex operators shall likely grow at an even faster pace compared to 2018 with Hyderabad, Pune and Chennai as the next cities of growth, especially among the large players who have grown tremendously in Bengaluru, NCR and Mumbai over the past couple of years, the report said.

During the first quarter of 2019, almost 1.8 msf of space was pre-committed. Nearly two-thirds of new supply for the first quarter in Bengaluru was pre-leased. About 50 percent of the upcoming supply over the next three quarters is also either pre-leased, or in advanced stages of negotiations, suggesting a continuation of ultra-tight vacancies and steep rental growth scenario. Nearly 1.0 msf of upcoming supply in Hyderabad was pre-leased during the first quarter of 2019.

With a strong start across markets in 2019, leasing activity this year is expected to gain momentum with the already high demand for quality office spaces. Demand activity is expected to heighten with the pre-commitment activity observed as well as the increase in net absorption levels in key markets this quarter.

"Captive centres will be a game changer this year with multiple outsourcing contracts worth 51 billion dollars up for renewal. With the first Indian REIT getting oversubscribed, the conditions are also favourable for developers seeking liquidity," said Anshul Jain, country head and managing director, Cushman & Wakefield India.

Owing to single digit vacancies, pre-commitment activity was expected in Hyderabad, Bengaluru, and Pune. However, the Delhi – NCR region has double digit vacancy rates, with almost 1.7 msf being vacated by occupiers as part of their relocation or consolidation plans. However, there were significant supply additions totalling to 3.7 msf in the first quarter of 2019 across Noida and Gurugram, with around 25 percent of this space being pre-committed by large IT-BPM, ecommerce and flex space operators.

Strong pre-commitment activity in this market region also resonated with the robust leasing activity of 2.8 msf in the first quarter of 2019, a year-on-year growth of 82 percent, with an expected average annual supply of around 8.6 msf up to 2021, headlined by both core office markets as well as the growth corridors. While flexible space operators continue to move forward with their expansion plans, IT-BPM and captive centres are also expected to drive demand for large spaces in the market, the report said.

Cities like Bengaluru, Pune, and Hyderabad continue to witness single digit vacancies, leading to faster rental growth in key office markets. Hot office markets like ORR (Bengaluru) and Madhapur (Hyderabad) where vacancies are ultra-tight (<5%) have registered a rental growth of 13-18 percent on an annual basis. Similar is the case with Pune SBD – East (Kharadi, Viman Nagar and Hadapsar) where rentals have escalated by 8 percent during 2018.

Owing to high supply, net absorption also almost doubled in the first quarter of 2019, as compared to the first quarter of 2018. Hyderabad, Mumbai, and Bengaluru recorded almost a 3X jump in net absorption levels. This strong growth demand is led by rapid expansion by occupiers in the technology and IT-BPM space, ramp-up by co-working players, and investments of companies in global capability centres.

Captive Centres accounted for 14 percent of the total leasing in the first quarter of 2019, as India gradually emerges as a hub for global in-house centres/capability centres mainly from the North American and European markets. While the leasing share of Healthcare and BFSI sectors were modest in the first quarter of 2019, at 3 percent and 5 percent respectively, the BFSI sector is expected to see growth in leasing after the elections.
First Published on Apr 22, 2019 02:06 pm
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