Office Leasing Across Key Indian Cities Continues to Grow; Space Take Up Crosses 10 Million sq.ft. In Q3, 2017

Increased Interest from EMEA Corporates for India; Share of Office Space leasing at 14% in Q3, 2017, up from 9% in Q2, 2017

Share of Office Leasing by E-commerce grows from 3% to 10%; Co-working deals reported across various cities

 

New Delhi, October 9, 2017: CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its latest India Office MarketView Report – Q3, 2017. According to the report, leasing activity for prime office space across key cities in India remained robust during Q3, 2017, crossing 10 million sq.ft. With EMEA corporates showing an increased interest in India’s office segment, the share of office leasing from these firms was recorded at 14% in Q3, 2017, up from 9% in Q2, 2017. As in earlier quarters, space take up was dominated by the IT/ITeS sector with 34% share of overall space leased across key cities. It is noteworthy to highlight that the share of office leasing by e-commerce firms grew from 3% earlier this year to 10% in Q3, 2017. Other segments that drove the demand included the Engineering and Manufacturing segment (19%), BFSI segment (10%), and Co-working/Business Centers (6%) which is witnessing increased activity in recent months.

 

During Q3, 2017, new supply addition witnessed a marginal, quarter-on-quarter dip to reach 7.2 million sq.ft. during Q3, 2017. Mumbai, Bangalore and Delhi NCR, accounted for almost 80% of the supply addition followed by Chennai and Hyderabad. Leasing activity was driven by small and medium-sized transactions (<50,000 sq. ft.) with small sized transactions (<10,000 sq. ft) alone, comprising 40% of all transactions reported during the quarter.

 

A review of the data for the first nine months of the year reveals that leasing activity continues to remain robust across the key cities. Key highlights for the segment for the January – September 2017 period are:

 

  • Absorption touched 29 million sq.ft.; marginally lower compared to same period of 2016
  • Bangalore led leasing activity, followed by Hyderabad; signaling the growing prominence of the city as a preferred destination by corporates
  • NCR records 2.4 million sq.ft. of new supply y-o-y in the first nine months
  • New office space completion down 3% y-o-y

 

Commenting on the findings of the report, Anshuman Magazine, Chairman – India South-East Asia, CBRE said, “India’s prime office market is evolving at a rapid pace. Occupier strategies continue to focus on consolidation/expansion as well as cost and greater flexibility of office space. The advent of co-working and shared office space formats are also influencing the market to some extent. While demand for traditional office space will continue to dominate the segment, it will have to make allowance for newer formats that are slowly gaining prominence and absorbing a part of the overall pie.”

 

Ram Chandnani, Managing Director – Advisory & Transaction Services, CBRE South Asia Pvt. Ltd. added, “Despite availability of quality, ready to move in office space remaining constrained, overall office leasing continued to be high during the quarter. The sustained interest from EMEA and US corporates highlights India’s continued preference as a destination for office space. Going forward, as occupiers continue to future proof their portfolios and hedge against future rental escalations, we can expect to witness a rise in pre-leasing of space across various cities. This shift in occupier strategy, focus on cost, and the growing prominence of alternative options like co-working spaces, could impact the demand for office space in the short-term.

 

City Highlights – Q3, 2017

National Capital Region

  • Gurgaon dominated leasing activity during the quarter
  • While quarterly supply addition increased, it was limited to Gurgaon primarily due to receipt of long pending completion certificates for key developments
  • Leasing activity was dominated by IT/ITeS corporates, followed by engineering and manufacturing firms

Mumbai

  • Office space take-up was largely concentrated in PBD - Navi Mumbai, Thane; accounting for almost half of the city’s leasing activity
  • Supply addition witnessed in PBD - Navi Mumbai and ABD
  • BFSI companies continued to dominate space take-up, followed by IT/ITeS/BPO/KPO companies
  • Rental values remained stable

Bangalore

  • Leasing activity fell marginally on a q-o-q basis, largely concentrated in non-SEZ developments
  • Office space demand was mainly driven by engineering and manufacturing, IT/ITeS and e-commerce firms which took up large sized spaces
  • Supply addition remained subdued with only Northern Bangalore witnessing supply addition during the quarter
  • Co-working operators continued to be active

Chennai

  • Leasing activity grew on a q-o-q basis; mainly concentrated in OMR Zone I and Mount Poonamallee Road (MPH Road)
  • Rental growth witnessed in OMR Zone I (IT) and GST and MPH Road (SEZ)
  • Office space demand was mainly driven by e-commerce, IT/ITeSand BFSI firms
  • Supply addition rose in the city on a q-o-q basis

Hyderabad

  • Leasing activity fell on a q-o-q basis
  • IT/ ITeS corporates dominated leasing activity, followed by BFSI and research, consulting and analytics corporates
  • Supply addition witnessed in IT and Extended IT Corridor
  • Rental values continued to grow across IT and SEZ developments

Pune

  • Leasing activity increased on a quarterly basis
  • Rental values rose on a quarterly basis across most micro-markets
  • Office space demand was mainly driven by IT/ITeS firms while consulting, research and analytics and engineering and manufacturing firms were other prominent occupiers
  • Co-working operators continued to be active in the city

Kolkata

  • Leasing activity was mainly concentrated in Salt Lake V and Rajarhat, followed by developments in SBD
  • Electronics corporates followed by media and research, consulting and analytics firms led demand
  • Bulk of the demand was concentrated in IT developments

Kochi

  • Leasing activity increased on a quarterly basis; mainly concentrated in SBD
  • Rental values remained stable
  • The city witnessed negligible supply addition during the quarter
  • Leasing activity in the city was mainly driven by the research, consulting and analytics sector, followed by IT/ITeS corporates

Office leasing activity is expected to sustain in the short-term, backed by companies looking to expand or consolidate their operations. Moving ahead, occupiers will continue to keep space utilization and innovation in workplace strategies at the forefront of their expansion plans. Demand and use of co-working spaces is expected to rise with the concept being adopted by corporates who have fluid expansion/occupation plans. With supply continuing to remain constrained across most cities, the demand-supply gap will lead to rental growth across most peripheral and sub-urban micro-markets. Pre-commitments in projects which are nearing completion are also expected to continue in the coming months, due to the limited availability of ‘ready-to-move-in’ space in the coming quarters.

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Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.​

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