Gurugram, 12 February 2019- The gross leasing activity across seven major cities in India was pegged at 50 million sq ft in 2018. This was the highest in the last eight years and was driven by buoyant leasing in Bengaluru and Delhi-NCR. Compared to 2017, gross leasing increased by 17% as occupiers continued to expand and consolidate. The top three sectors contributing to gross leasing were IT-ITeS (43%) of the total, flexible workplaces (14%), and BFSI (12%).
“Peripheral locations in major cities such as Bengaluru, NCR and Mumbai to gain occupier attention as they offer better quality contiguous space at lower rents. Moreover, flexible workplace operators in both central as well as peripheral business districts may see increased leasing. However, net take-up of space by occupiers may see lower growth given the growing need for workspace efficiency and cost effectiveness”, says Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.
New supply declined by 20% compared to 2017 and stood at 26.3 million sq ft 2018. The delay in completions owing to a slow pace of construction and approvals resulted in the deferment of new supply. Bengaluru had the highest quantity of new supply at 8.0 million sq ft, followed by Pune at 5.8 million sq ft.
Bengaluru retained its leading position in office leasing among the seven major cities in India, representing 28% of pan-India leasing volume despite 2018 witnessing 14 million sq ft of gross absorption, a decline of 9% YoY.
The fourth quarter of 2018 witnessed notable supply of 2.86 million sq feet, a threefold increase from the previous quarter. However, 2018 overall witnessed a decline of 37% compared to the previous year, with only 8.0 million sq ft of Grade A supply.
In 2018, the National Capital Region (NCR) recorded the highest leasing volume in the past eight years. The overall absorption of the region was 10.1 million sq ft in 2018, a 27.3% YoY increase.
Delhi’s office market recorded gross absorption of 770,000 sq ft in 2018, representing an annual reduction of 41.4% owing to limited availability in quality developments.
In the last two quarters of 2018, an additional 400,000 sq ft of supply was released into the market. Looking at future development plans from 2019-2021, Delhi is planned to see 3.9 million sq ft of office supply, increasing the existing office stock by 26.4%.
In 2018, Gurugram witnessed gross absorption of 5.4 million sq ft, an increase of 19.8% YoY. The Cyber City micromarket emerged as the most preferred location, constituting 21.7% of overall leasing activity, followed by Golf Course Extension Road (GCER) and Golf Course Road at 15.8% and 12.1%, respectively.
On the supply front, the city witnessed 1.4 million sq ft of new supply, which is the lowest since 2009.
NOIDA’s office market witnessed record leasing activity in 2018 at 3.9 million sq ft, registering a significant increase of 86.2% YoY.
In 2018, the NOIDA’s Grade A office market saw new completions of 1.5 million sq ft, increasing the city-wide stock by 5.2%.
In Q4 2018, Mumbai recorded gross absorption of 2.1 million sq ft, registering an increase of 5.7% QoQ. Leasing activity was concentrated in the micromarkets of Andheri East (30%), Bandra-Kurla Complex-BKC (18%), LBS/Eastern Suburbs (16%), and Goregaon/JVLR (13%).
In Q4 2018, the city witnessed new supply of 1.03 million sq ft. This is only the second time Mumbai has seen over 1.0 million sq ft of new supply, after Q2 2018.
2018 witnessed gross absorption of 6.8 million sq ft, the highest in the last eight years.
Hyderabad witnessed new Grade A supply of about 1.4 million sq ft in Q4 2018, totaling 4.3 million sq ft for 2018.
In Q4 2018, Pune recorded gross absorption of 2.3 million sq ft, a quarterly increase of 28%. The full year 2018 saw 6.7 million sq ft of leasing activity.
Pune witnessed new supply of about 883,700 sq ft in Q4 2018, 10% lower than the previous quarter. Of this, 57% was concentrated in the micromarket of Hadapsar/Fursungi, followed by Senapati Bapat Road on 38%, while the remaining 5% was spread across Baner and Kharadi.
Chennai recorded 3.9 million sq ft of gross leasing in 2018, a decline of 18% from the previous year. This is likely due to low availability of Grade A office space in preferred locations such as Old Mahabalipuram Road (OMR) pre-toll and Mount Poonamallee High (MPH) Road.
2018 witnessed a substantial addition of around 2.5 million sq ft of Grade A office space, a 41% increase from the previous year. Based on scheduled timelines of Grade A developers in the city, we project a robust supply pipeline of around 20 million sq ft over 2019-2021.
The Kolkata office market witnessed a 13.8% increase in gross absorption in 2018. In Q4 2018, overall absorption was 215,500 sq ft, with the full year 2018 reaching 910,000 sq ft.
We project new supply of about 2.4 million sq ft over the next three years, increasing total stock by 8.9%. About 50% of the planned developments are in the Sector V micromarket, followed by the SBD micromarket on 43%, while the CBD is planned to account for 7.4%.
“As expanding flexible workspace operators offer new-style offices, we advise developers to offer premium services and flexibility to tenants, at least in the peripheral locations with high vacancy, to retain leasing momentum”, says Megha Maan, Senior Associate Director, Research at Colliers International India.
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