After dull 2014, developers to double office space supply in 2015

Top six cities expected to add 42.2 mn square feet of office space this year

Buoyed by improved demand for office spaces, property developers are doubling the supply of commercial properties in many cities such as Mumbai, Delhi NCR and Bengaluru.

Due to low demand since 2011, not many developers launched new projects in the latter years which led to new supply additions reaching year low in 2014.

Top six cities are expected to add 42.2 million square feet of office space this year, 1.8 times higher than last year, according to property consultant Colliers International.

Bengaluru, the country's IT capital, is expected to see a fourth of total supply or 12.98 million sq ft this year compared to 7.16 million sq ft last year. Mumbai office market is expected to see 8 milllion sq ft of the supply compared to just 3.30 million sq ft last year.

NCR is also expected to see double the supply of 2013. All the big names such as DLF, Unitech, 3C in Delhi NCR; Embassy group, RMZ, Brigade among others in Bengaluru; Kanakiya, Raheja group in Mumbai among others are looking to add millions of sq ft of office properties to tap the growing demand, consultants said.

"There is an increased demand for office properties. Half of last year has clearly picked up and rents have gone up," said Rajeev Talwar, executive director at DLF, the country's largest developer. Talwar added that rents have reached to Rs 85 to Rs 100 a sq ft now from the lows of Rs 45 in 2010.

According to analysts, the company expected to add over a million sq ft of office and looking to lease out an area of 3.5 million sq ft this year. NCR, where DLF operates, is expected to see absorption of 8 million sq ft this year as against 7.71 million sq ft last year.

However, the real action is expected to be there in Bengaluru which accounted for 39% of total space absorbed in the country in 2014.

Embassy Office Parks, a joint venture between private equity major Blackstone and Embassy Group,has plans to deliver 49 projects including the development of a record 11.5 million sqft of fresh office space across Bengaluru and Pune over the next 36 months or 3.8 million sq ft a year.

"Looking at the current request for proposals (RFP) in the market and the current demand we foresee demand in Bangalore to be around the same as 2014, keeping that trend we are bulish about the commercial market and looking at more new launches ," Thirumal Govindraj, managing director - management at Bengaluru based RMZ Corp which is looking to add 1.5 million sq ft this year.

Some of the major deals that Bengaluru saw last year were e-commerce player Flipkart leasing 3.5 million sq ft, KPMG and Honeywell pre-committing to around 1.6 million sq ft in Bangalore.

However, due to large supply, average rental growth is expected to be lower than 2014. According to Colliers, the average rental growth in Mumbai is expected to be 1.9% in 2015 compared to 3.8% last year. Bengaluru is expected to see an average growth of 6.5% this year compared to 10.2% last year.
 

Officer supplies
City	2014	2015
Mumbai	3.3	8
Delhi NCR	5.23	10.25
Bengaluru	7.16	12.98
Chennai	1	3.47
Kolkata	1.14	3
Pune	5.2	5.12
Source: Colliers
Area in Million sq ft