The first quarter of the current calendar year witnessed 25 per cent jump in absorption of office properties on a yearly basis at 11 million sq ft, said a new report.
This is a departure from the norm as the first quarter of the year usually witnesses subdued activity because corporates are still finalizing their business strategies. During the January to March quarter of 2017, Bangalore reported the highest demand for office space and accounted for more than the combined share of the markets of Delhi-NCR, Mumbai and Hyderabad, said a report from property consultant CBRE.
In line with the increasing demand, supply addition more than tripled to touch 9.7 million sq. ft. during the first quarter, indicating continued occupier interest for quality office spaces across the country. More than 80% of this new supply was in Bangalore, Mumbai, Chennai and Delhi-NCR, CBRE said.
Tech companies led office space take-up during the quarter with a 25 per cent share, while BFSI firms garnered a 24 per cent share. The share of e-commerce firms rose to 15%, thanks to a few large-sized deals by leading global and domestic players, it said. Other sectors that contributed to leasing activity were engineering and manufacturing, research, consulting and analytics and co-working/business centre operators. Pre-commitments continue to be the primary mode of transaction, especially in cities such as Bangalore that had a dearth of quality ready-to-move-in supply.
Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “India’s office market has begun the year on a strong note, dispelling fears of technology and other disruptions impacting the market. With strong economic fundamentals, constantly improving business environment, and the government’s concerted efforts to improve infrastructure in our cities, India’s attractiveness as a preferred market in the region for international and domestic occupiers has only grown. Moreover, the country offers quality offices spaces at reasonable rentals.”
Commenting on the findings of the report, Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE said, “Over the past several quarters, pre-commitments by occupiers in under-construction projects has impacted leasing activity across India’s office market. Constrained supply of ready-to-move-in space, coupled with rising rentals, has led to this trend gaining traction in recent months. The uptick in leasing activity in the first quarter is largely due to several projects getting completed. Going forward, as corporate continue to evaluate cost-effective options and stagger their expansion plans, pre-commitments in under-construction projects will have a significant impact on office leasing activity across key cities.”
During the quarter, 45% of all the transactions were for small-sized spaces while mid-sized transactions accounted for a 42% share. There were a few large-sized deals, most of which were recorded in Bangalore, followed by a few in Mumbai, Delhi-NCR, Chennai and Hyderabad.