Kolkata, November, 16, 2018 – Kolkata recorded gross absorption of 302,939 sq ft in Q3 2018 representing a QoQ increase of about 50%. In Q3 2018, Grade A space take-up was concentrated in the Peripheral Business District (PBD) and Sector V, accounting for 43% and 38% of the total absorption, respectively. Leasing activity in Information Technology developments accounted for 37% of the total absorption in Q3 2018. This is the predominant source of demand in the city, and developers should take note when planning their future supply. This is followed by commercial office developments on 23% and IT-Special Economic Zones (SEZs) on 22%. We expect the demand for IT developments such as IT parks and IT-SEZs to increase further due to the city government’s initiatives to attract technology companies.

“Commercial leasing activity over the past few quarters was restricted to mostly relocation and consolidation. However, there has been some notable expansions in the IT/ITES and coworking sectors in the last quarter. Industry friendly initiatives by the government, excellent infrastructure and availability Grade A office spaces at competitive rates has added to the overall positive sentiment”, says Shubho Routh, Associate Director, Office Services (Kolkata) at Colliers International India.

Kolkata witnessed significant leasing by the Information Technology Enabled Services (IT/ITeS) occupiers accounting for 54% of the total followed by flexible workspace operators on 21% and engineering & manufacturing on 5%. We expect the dominance of the IT/ITeS sector to increase after the introduction of the Silicon Valley Hub Asia in the New Town area, which is the flagship initiative by the state administration to strengthen IT industry in the city.

We expect Kolkata to record stable robust leasing activity during 2018-2021, with aggregate gross leasing of 3.8 million sq ft of Grade A office space is projected to be leased by occupiers. In line with this, a few occupiers have already pre-committed spaces in upcoming Grade A buildings. In our opinion, major initiatives from the state government such as the Silicon Valley Hub and the new IT policy are likely to propel the market further. However, we advise developers to keep a track of the demand and plan the construction timelines over next three years to avoid oversupply by 2021.

The city-level vacancy remained high at 28.9%, with the majority of available spaces in the peripheral locations of New Town and Rajarhat. We expect the vacancy rate to stay in the range of 26-30% during 2019-2021 owing to the new supply scheduled to be delivered.

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