The office space segment of the real estate sector is showing signs of a revival, in contrast to the residential segment that is yet to pick up.
Office space in Delhi and Mumbai markets has shown robust growth, with absorption doubling to 0.21 million sq ft and 2.93 million sq ft, respectively, in the second quarter of this year.
In Delhi, the banking, financial services & insurance (BFSI) sector contributed 44 per cent to the total absorption, followed by media & entertainment at 15 per cent, and manufacturing at 13 per cent, according to a report by Colliers International.
Aero City, Connaught Place, Saket and Okhla were the preferred destinations among occupiers and 80 per cent of the deals were concluded in these locations. In major office transactions, Amarchand Mangaldas took 45,000 sq ft in Religare House at Saket; BTMU and BBC took 40,000 million sq ft each in Bharti Worldmark at Aero City.
In Mumbai, BFSI and information technology (IT) & IT-enabled services (ITeS) sectors leased out 1.91 million sq ft, followed by manufacturing and pharma at 0.61 million sq ft and media & entertainment at 0.20 million sq ft during the second quarter of this year.
Among the major deals in Mumbai were Home Credit, which took 0.16 million sq ft in Reliable Group’s Tech Space at Rabale; Bank of America taking 0.14 million sq ft in ONE BKC by Wadhwa Group at Bandra Kurla Complex; and Sutherland taking 0.12 million sq ft in Reliable Tech Park at Navi Mumbai.
Despite the increase in absorption in Delhi, average rents declined two per cent compared with the previous quarter, barring Nehru Place which witnessed a four per cent rise. The capital city witnessed 0.3 million sq ft of new completions this quarter. Like the previous quarter, no commercial grade-A office space was launched in Delhi in the second quarter of 2015. “The massive increase in absorption helped in confidence among investors as well as the developers and resulted in the launch of new projects in Mumbai,” the report added.
In Gurgaon, 1.8 million sq ft office space was absorbed in the second quarter of 2015 — a growth of 60 per cent over the previous quarter. For the first six months of 2015, the absorption stood at 2.9 million sq ft. IT/ITeS remained the key driver with 88 per cent share, followed by BSFI at 10 per cent and the rest at eight per cent.
In Gurgaon, Snapdeal, NTT Data, Zomato, Arvato, BCG Group and SAP together took 1.17 million sq ft. Udyog Vihar was the most preferred location this quarter, registering deals of 0.79 million sq ft — 44 per cent of the total deals. Apart from Udyog Vihar, occupiers also opted for office spaces on Golf Course Road and its extension, and Sohna road with 0.72 million sq ft — 40 per cent.
Similarly, the Pune office market saw absorption of 1.84 million sq ft in the second quarter, against 0.89 million sq ft in the first quarter. IT/ITeS occupiers were the primary demand drivers, accounting for 70 per cent of the total area leased.
Featured in Business Standard on 28 July, 2015