India’s office market continues to perform well as leasing rose 7 per cent during January-September 2018 to 32.2 million sq ft in nine major cities on higher demand of spaces from corporates and co-working operators for their expansion, property consultant CBRE said. Office space leasing stood at 30.1 million sq ft in the year-ago period, CBRE said in its ‘India Office MarketView– Q3 2018’ report. It tracks Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad, Ahmedabad and Kochi.
The consultant attributed the rise in leasing to higher demand as well as supply of office spaces, which went up by 25 per cent to 23 million sq ft during the first three quarters of 2018. “India’s economic growth continued on its upward trajectory and real estate services (along with financial and professional services) sector contributed to this economic surge…,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE. The sectors such as banking, financial services and insurance (BFSI), engineering and manufacturing, and agile/co-working/ business centres are likely to account for a larger share in leasing activity going forward, he added.
According to the report, leasing of office space rose 3 per cent during the third quarter of 2018 calendar year at 10.9 million sq ft compared with the year-ago period. “The trend of agile spaces is rising during a booming start-up era, even as corporates are drawing up fluid expansion and occupation plans. Occupiers are also expected to keep strong checks on space utilisation ratios and innovation in workplace strategies while expanding their footprint and implementing their expansion plans,” said Ram Chandnani, MD, Advisory & Transaction Services, India, CBRE South Asia.
He said special economic zones (SEZs) are expected to account for a larger share of the upcoming supply over the next few quarters. “Given the approaching sunset date, we anticipate an increase in demand for SEZs space”. Tech corporates (with a share of 48 per cent) drove office space take-up in the country during July-September quarter, followed by engineering and manufacturing companies (14 per cent) and co-working/business centre operators (11 per cent).
Other sectors such as BFSI (7 per cent) also contributed to the increase in leasing activity. “Co-working/business operators leased about 3.3 million sq ft of space in the first three quarters of the year, almost doubling their take-up reported in the first three quarters of 2017,” the report said. Overall, office leasing activity is expected to remain stable in the short term, backed by corporates looking to expand or consolidate their operations, the report said.
With supply slippages recorded across most cities, a supply-demand gap is expected to appear over the next few quarters, which is likely to drive rental growth, it added.