The southern cities have dominated the office absorption chart, with Bengaluru at the top (25%) followed by Hyderabad (20%) and Chennai (11%), during Q3 of calender year 2016, according to a report. Gurgaon (13%), Mumbai & Noida (10%), Pune (8%), Delhi (2%) and Kolkata (1%) just came behind the southern cities.
As per the latest office property market report by Colliers International, the office absorption witnessed sustained momentum with Grade A absorption totalling 9.6 milion sq- ft, making it 28.26 million sq ft so far in 2016.
Although Q3 2016 marked a Q-o-Q decrease of 7.6% in gross leasing volume, we expect leasing activity to pick up in the upcoming quarters. Vacancies are set to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad. The improved business confidence index showed a 5.7% increase during April – June quarter, which will lead to increase in office demand.
According to Colliers, the growing office demand will outstrip the supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad. This should therefore lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario.
“The improving economic picture provides a favorable background for continued expansion in commercial property markets. Nasscom predicted 10-12% annual growth in IT and technology enabled services until 2020 that should help the office market to remain strong in 2017. That said, a further impetus to growth should be provided by other macro-economic factors such as declining oil prices and increasing monetary easing facilitated by ongoing moderation in inflation” said Surabhi Arora, senior associate director, research at Colliers International.