Bengaluru, Delhi-NCR among top 2 in office leasing in APAC

By: |
June 08, 2016 5:39 PM

These two Indian cities together saw gross leasing of more than 0.4 million square metres (net leasable area) in 1Q16, out of which Bengaluru saw more than 0.2 million square metres and Delhi-NCR saw more than 0.1 million square metres.

RealtyAt a global level, 2016 is expected to represent the peak of the office development cycle with 16.8 million square metres of new deliveries anticipated in tier-I cities. (Reuters)

The year started well in Asia-pacific (APAC) for office space with the strongest leasing activity recorded in Bengaluru, Tokyo and Delhi-NCR in 1Q16, according to a report by JLL.

“Bengaluru saw the highest leasing volumes in APACon the back of big-ticket transactions, while Tokyo saw good pre-commitments on upcoming supply. Delhi came third thanks to healthy leasing activity as also pre-committed space becoming operational, ” Anuj Puri, Chairman & Country Head, JLL India said.

These two Indian cities together saw gross leasing of more than 0.4 million square metres (net leasable area) in 1Q16, out of which Bengaluru saw more than 0.2 million square metres and Delhi-NCR saw more than 0.1 million square metres.

This quarter did not see any Chinese city in the top-3 as new leasing was down in Beijing and Shanghai partly due to the timing of new supply and less available space. Otherwise, demand for office space in China’s tier-I markets was largely sustained despite slowing growth in the country’s economy.

Effects, however, are being felt elsewhere in the region with the resources-centric economies in some Australian cities suffering from China’s slowdown. Australia’s leasing volumes in 1Q16 dropped by 24 per cent (y-o-y), with all markets down except Melbourne. Demand in Sydney remained healthy, underpinned by education and IT sectors; however, activity by the tech sector was less than a year earlier and this contributed to lower volumes.

Development cycle peaks, but supply pipeline is under control

At a global level, 2016 is expected to represent the peak of the office development cycle with 16.8 million square metres of new deliveries anticipated in tier-I cities. Current projections suggest that completions will then diminish to around 15.8 million square metres by 2018. As we have highlighted in previous reviews, these levels are still well below the previous development peaks of 2001 and 2008.

In India, 2017 is projected to see the peak of office space supply but this will still be below the peak of 2011. Inadequate ‘relevant’ supply in 2016-17 will be a limiting factor for absorption of space. The supply pipeline is expected to reduce from 2018.

Global vacancy rates edge upwards

The global office vacancy rate has edged up slightly for the first time since 2012, rising by 10 basis points to 12.2 per cent. This is largely due to marginal increases in the Americas (to 14.7 per cent) and Asia Pacific (to 10.9 per cent). Meanwhile the vacancy rate has continued its steady decline in Europe (to 8.6 per cent).

The global office vacancy rate is expected to hover at around 12 per cent for the remainder of the year, with falls in the US vacancy rate balanced by a modest rise in Asia Pacific to around 11.7 per cent. Vacancy is expected to be broadly stable in Europe. India (the top-7 tier-I and tier-II cities) saw a vacancy rate of 15.9 per cent in 1Q16 and the same is expected to be at 16 per cent by the end of 2016 and 16.3 per cent by end of 2017.

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