Gurgaon, January, 15, 2018 – Notwithstanding the macroeconomic disruptions, the commercial real estate (CRE) market remained robust in 2017. The year 2017 witnessed a pan-India leasing volume of ~42.8 million sq ft (3.9 million sq m), excluding renewals and pre-commitments, which is marginally up from 2016 absorption level (~41.6 million sq ft in 2016).  Bengaluru remained the frontrunner in office leasing, witnessing a record- breaking leasing of more than 15 million sq ft (1.4 million sq m), occupying 36% of market share followed by NCR (18%), Mumbai (13%), Chennai (11%), Hyderabad (10%), Pune (8%) and Kolkata (2%). The demand for Grade A office space was primarily driven by technology companies followed by engineering, manufacturing, banking and finance, and coworking operators.

“The trend of pre-committing large spaces had picked up in 2017, with more than 4 million sq ft (0.3 million sq m) of office space pre-committed in 2017, in under-construction projects. Furthermore, coworking or flexible working space have made their entry into the market in a big way, representing about 11% of total absorption in 2017, compared to last year's share of 3%”, says Ritesh Sachdev, Senior Executive Director, Occupier Services, Colliers International India.

As per Colliers Research, the market will be dominated by the following trends in 2018:
  1. Flexibility to remain key focus in work space strategies: One of the biggest shifts in workplace strategies in India is likely to be the improvement in flexibility offering to occupiers by developers. Coworks supported by RMZ developers has rolled out flexible work-space in their portfolio and opened several coworking spaces in their own buildings by investing in modern technologies across India. Developers such as DLF, Vatika, Supertech and Ascendas alike are also exploring this new emerging workplace. Thus, we expect flexible office space to flourish in coming years, given its convenience and cost-effectiveness. In the past two years, the flexible office operators leased more than 4.6 million sq ft (0.4 million sq m).
  2. Pre-commitments and BTS to remain in trend: With single digit vacancies in the main IT-ITeS locations, such as Bengaluru, Hyderabad, Pune and Chennai, occupiers continued to pre-commit large office spaces. We expect the trend of high pre-commitment rate in large office spaces and SEZs to follow in the upcoming years.
  3. Occupiers to explore Tier-II & III cities for back-office requirements: Many technology and e-commerce companies are exploring expansion in Tier II and III cities due to cheaper resource and rising cost of power. Given the government's push for smart cities development, we believe that firms should consider expanding in the cities where the state governments intend to spur growth by offering more fiscal and non-fiscal incentives and building infrastructure projects such as airports and railways.

One of the biggest shifts in workplace strategies in India is likely to be the improvement in the degree of flexibility offered to occupiers by the developers. We expect these large players to compete against traditional offices to target major corporates besides focusing on small-and-medium enterprises. Landlords should recognise the benefits of flexible workspace and redesign their office spaces across their portfolios. They should look to offer quality and more efficient office space through subdividing floors into multiple office suites. The strategy should be to redesign existing space to create collaborative workspaces in order to meet the needs of smaller tenants from which we are currently witnessing strong demand”, says Surabhi Arora, Senior Associate Director, Research, Colliers International India.

About Colliers International Group Inc.

Colliers International Group Inc. (NASDAQ and TSX: CIGI) is an industry-leading global real estate services company with 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customised research; and thought leadership consulting. 

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