Net office space leasing rose by 40 per this year across seven major cities to an all-time high of 46.5 million sq ft, mainly driven by higher demand from IT/ITeS firms and coworking operators, according to property consultant JLL India.
Office space absorption stood at 33.2 million sq ft in 2018 across seven major cities -- Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata.
"India office market has set a new benchmark and recorded a historic high, both in net absorption and new completions. While 46.5 mn sq ft of space got absorbed, nearly 52-mn sq ft of Grade A office space was completed in 2019," JLL said in a statement.
New supply also rose 45 per cent to 51.6 million sq ft from 35.7 million sq ft, while vacancy reduced to 13 per cent.
The strong expansion of IT/ITeS (42 per cent of overall leasing) and co-working operators (14 per cent of overall leasing) in cities with strong fundamentals and planned infrastructure improvements has led the strong growth in demand so far, the report said.
Bengaluru, Delhi-NCR and Hyderabad accounted for nearly 70 per cent of the net absorption in 2019.
Mumbai witnessed a marginal drop of 2 per cent year-on-year in net absorption on the back of limited relevant supply despite strong latent demand from large occupiers. Hyderabad recorded a net absorption of 10.5 mn sq ft in 2019.
With the net absorption of more than 5 million sq ft in the last quarter (October-December), the Delhi-NCR market too achieved a new yardstick of around 11 million sq ft in 2019.
"Establishment of REIT will lead to developers thinking more long-term and building better quality assets. With almost all top 10 office developers having institutional partners, we expect a further flight to quality, enhanced technical upgrades of existing portfolio, smart buildings, more focus on wellness and human experience. Future demand is expected to come from the datacentre industry as well," JLL India CEO and Country Head Ramesh Nair said.
Occupiers will continue their focus on cost, talent, agility, compliance and productivity, he added.
Investment sentiments in office space have remained strong in the country leading to a general drop in vacancy levels from the previous year.