Office space absorption is likely to record a new high of nearly 42 million sqft by the end of 2019 mainly on the back of steady economic growth, a favourable policy environment and growing preference of global occupiers for Indian offices, a report said.
According to a study by property consultant JLL India, the office space absorption across seven cities including Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata grew 21 per cent during H1 2019 to 21.8 million as compared to 18.1 million sqft in corresponding period last year.
At the same time, going by the new launches during H1 2019, which stood at 24.3 million sqft as against 21 million sqft in H1 2018, the total launches by the end of the calendar year is expected to reach 46.9 million sqft.
"Steady economic growth, favourable policy environment, growing preference of global occupiers for Indian offices and listing of first Real Estate
Investment Trust (REIT) in the country have put the India office market on a growth path. This indicates optimism amongst occupiers with continuity of governance and a stable government," it said.
It further said a ramp-up by co-working players, which is of overall leasing, and occupiers in the IT/ITeS space (37 per cent of overall leasing) drove the strong growth in demand, 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," JLL India CEO and Country Head Ramesh Nair said.
He said the REIT listings by the Embassy-Blackstone suggests that the commercial real estate in the country has matured and evolved in the past decade, post 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," Nair said.
According to the report, vacancy levels dropped marginally from 14 per cent in H1 2018 to 13.3 per cent during January-June 2019. As per the report, Hyderabad witnessed a significant surge with net absorption multiplying almost four times as compared to the corresponding same period last year to 5.8 million sqft in H1 2019 from 1.5 million sqft in H1 2018.
The Mumbai office market in H1 2019 witnessed net absorption of 2.94 million sqft along with a strong demand from the BFSI sector in the MMR and IT/ITES in Navi Mumbai and Thane. However, this was nine per cent lower than net absorption in H1 2018.