Gurgaon, April, 12, 2016 – As forecasted by Colliers earlier this year, office market in India continued its successful legacy from 2015 by kick starting the year 2016 on a positive note. Office absorption leaped to over 8.8 million sq ft (including pre- commitments of ~0.8 million sq ft) across 9 major cities, upping the number by ~11% from the previous quarter. This absorption was primarily derived by traditional demand driver, technology sector. Backed by positive economic sentiments; business confidence index which increased by 5% in Jan 2016 and the GDP forecast of about 7.5%. Not surprisingly, Bengaluru with 33% share remained the top contributor of the demand, followed by NCR (Delhi, Gurgaon and NOIDA), Hyderabad, Pune and Mumbai.

The majority of markets are enjoying this growth and overall office market sentiments are optimistic. We anticipate positive momentum in the coming quarter as the overall office leasing pipeline seems strong and is steadily growing. Positive economic growth coupled with increasing business confidence index due to government’s proactive policy initiatives will be the few factors influencing the demand for office space in the coming quarter”, says Surabhi Arora, Senior Associate Director, Research at Colliers India.  

Bengaluru witnessed a total office absorption of 2.65 million sq ft, which is a 13% quarterly jump from the last quarter. IT-ITeS, (also comprising of technology start-ups and e-commerce companies) continued to remain the leading sector driving this demand with an 88% share in overall absorption.

NCR came the next (by clocking an overall absorption of 1.42 million sq ft). Gurgaon’s commercial real estate market recorded about 0.70 million sq ft of office space uptake in the first quarter of 2016 as compared to 0.45 million sq ft in previous quarter but about 30% less from the figures in Q1 2015.

Delhi and Noida recorded about 0.34 million sq ft and 0.38 million sq ft, respectively.

Hyderabad witnessed a robust demand from corporate occupiers in the first quarter as the gross leasing volume of 1.27 million sq ft was witnessed in the city. Hyderabad due to its affordable rents managed to attract major IT, digital and e-commerce companies, which announced their plans for huge investments to bolster their expanding network of technology development centers and facilities in the city. Leading e-commerce player, Amazon committed huge investments to set up its largest facility outside USA and leased approximately 350,000 sq ft in Raheja Mindspace in HITEC City. Apple, Inc. is also opening its first technology development center in India and has leased 250,000 sq ft.

Pune witnessed stable demand from the IT-ITeS sector as the market experienced over 1.15 million sq ft of absorption in Q1, even though the overall absorption in this quarter was 16% lower than the previous quarter. Hinjewadi and Airport Road / Pune Station continued to remain as the most preferred locations by major occupants with about 56% and 26% share respectively, in the total absorption. Over 4 million sq ft was available for fit-outs in Pune office market, of which 24% was located in Hinjewadi.

The year started on a good note for Mumbai, as the city doubled the office absorption from 0.49 million sq ft in Q4 2015 to jump to 0.93 million sq ft in Q1 2016. The IT/ ITeS sector dominated the city’s office absorption with over 38% (0.35 million sq ft) of the total absorption. The maximum number of office transactions were concluded in the western suburbs (0.32 million sq ft), including BKC, Andheri, Malad and Goregaon, followed by Central Mumbai (0.18 million sq ft) including Lower Parel, Worli and Elphinstone West and the Central Suburbs (0.17 million sq ft) including Vikhroli, Powai and Kanjurmarg.

Even though Chennai continued to attract the interest of office occupiers, the absorption levels however witnessed a significant dip of 42% from the previous quarter by recording only 0.70 million sq ft of absorption, out of which 86% was contributed by the IT/ ITes sector. This dip can be attributed to the fact that number of transactions are still in the execution stage. Renault Nissan Technology Business Centre (RNTBCI- 180,000 sq ft); Citibank (48,000 sq ft) and Lennox (38,000 sq ft) were amongst some prominent corporate occupiers that leased spaces on GST Road and Old Mahabalipuram Road (OMR – Pre toll) belt respectively. OMR-Pre toll corridor remained as the preferred location for occupiers to consolidate and expand operations by witnessing ~30% of total absorption in this quarter. 

Kolkata office market witnessed disappointment as only 170,000 sq ft of absorption was witnessed, which is 32% less than the previous quarter’s absorption of 250,000 sq ft. Major transactions during the quarter included the lease of 30,000 sq ft office space by “Fosma Meritime” in Godrej Water Side and the lease of 26,000 sq ft by “ICFAI Business School” in an Individual Building.

 

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