The total stock of grade-A office space in top seven cities is likely to settle at 440 million sq ft by end of 2015, says an Assocham-JLL joint survey.
The report titled ‘Housing for All: Catalyst for Development & Inclusive Growth’ says that Mumbai and Bengaluru are expected to lead in terms of total operational grade-A office stock at 100 million sq ft and 93 million sq ft, respectively, by end of 2015.
“Strong demand from IT occupiers for relatively larger spaces is helping Bengaluru to build more, which will gradually narrow down the gap in operational stock of both these cities,” the study noted.
Amid tier-II cities, Pune is expected to lead the market in constructing new office spaces with addition of about 45 million sq ft office space, it said.
A robust take-up of about 31 million sq ft is projected for 2015 while a total of about 34 million sq ft of office space is expected to become operational.
“Over the past few months, an improvement was seen in occupiers’ sentiment in commercial real estate. With a pro-business government at the Centre, the office sector is expected to see a lot more traction and various multi-national occupiers and investors entering the country,” Assocham Secretary General D S Rawat said.
During the second half of 2015, an improvement in business sentiment will likely result in greater confidence, and implementation of expansion plans will result in an increase in net absorption, highlighted the study.
“2015 will also provide a window of opportunity for occupiers and investors as rents and capital values in most of micro-markets are at their cyclical bottom,” Rawat said.
According to the report, select micro-markets of cities still offer attractive rents as compared to its peak while several of them have already shown signs of revival due to strengthening demand for office space.
Vacancy rates are likely to be in the range of 15-18 per cent by end of 2015, it added.
Amid tier-I cities, National Capital Region (NCR), Mumbai and Bengaluru are likely to witness big ticket transactions along with substantial number of leasing transactions in operational and under-construction projects.
While among tier-II cities, Pune is expected to see healthy demand in the medium term as few quality IT special economic zones (SEZs) are in an advanced stage of construction with strong pre-commitments.
In terms of supply of newly completed office spaces, Delhi-NCR (which saw lot of completions in first half of 2015) is showing a forecast supply of 10 million sq ft at the end of 2015 while Mumbai and Bengaluru are expected to inject about six million sq ft and about eight million sq ft, respectively.
Delhi-NCR, Mumbai and Bengaluru are forecast to record net absorption of 6.1 million sq ft, about 7 million sq ft and 7.6 million sq ft, respectively by end of 2015.