India's total office stock may settle at 440 million sqft by year end
With an improvement seen in occupiers' sentiment in the commercial real estate, net absorption of offices spaces in India is expected to be about 31 million square feet by end-2015, according to a just concluded ASSOCHAM-JLL joint study.A total of about 34 million sqft of office space is expected to become operational in 2015 and India's office stock is likely to settle at 440 million sqft by end-2015, noted the study titled 'Housing for All: Catalyst for development & inclusive growth,' conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with property advisory firm JLL.
With a pro-business government at the Centre, the office sector is expected to see a lot more traction and various multi-national (MNC) occupiers and investors entering the country, said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the findings of the study.
The ASSOCHAM-JLL study has forecasted that 2015 will provide a window of opportunity for occupiers and investors as rents and capital values in most of micro-markets are at their cyclical bottom.
Select micro-markets of cities still offer attractive rents as compared to its peak while several of them have already shown signs of revival due to strengthening demand for office space, highlighted the study.
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Vacancy rates are likely to be in the range of 15-18 per cent by end-2015, added the study.
It is also forecasted that office demand is likely to remain robust at 34 million sqft at 2015 year-end.
Amid tier-I cities, National Capital Region (NCR), Mumbai and Bangalore are likely to witness big ticket transactions along with substantial number of leasing transactions in operational and under-construction projects.
While among tier-II cities, Pune is expected to see healthy demand in the medium term as few quality information technology (IT) special economic zones (SEZs) are in an advanced stage of construction with strong pre-commitments.
In terms of supply of newly completed office spaces, Delhi-NCR is showing a forecast supply of 10 million sqft at the end of 2015 while Mumbai and Bangalore are expected to inject about six million sqft and about eight million sqft respectively of new office spaces.
Against this supply, Delhi-NCR, Mumbai and Bangalore are forecast to record net absorption of 6.1 million sqft, about seven million sqft and 7.6 million sqft respectively by end-2015.
Mumbai is expected to lead the country in terms of total operational Grade-A office stock of 100 million sqft by the end of this year followed by Bangalore (92.6 million sqft), highlighted the ASSOCHAM-JLL study.
Strong demand from IT occupiers for relatively larger spaces is helping Bangalore to build more, which will gradually narrow down the gap in operational stock of both these cities.
Amid tier-II cities, Pune is expected to lead the market in constructing new office spaces adding around 44.7 million sqft of office space.
The ASSOCHAM-JLL study has also forecasted that with about 12-15 malls being under construction and expected to be operational by end-2015 at pan-India level thereby adding about 6.7 million sqft of new organised retail space. Delhi-NCR is expected to see largest number of completions, followed by Mumbai and Bangalore.
In terms of vacancy rate in organised retail space, it is forecasted to be highest in Delhi-NCR at 24 per cent followed by Mumbai and Pune both at 20 per cent while the lowest vacancy rate is likely to be seen in Kolkata followed by Chennai, Bangalore and Hyderabad.
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