Total net absorption of office space in H1 2017 (January-June 2017) closed at a deficit of 11% from the same time last year and was recorded at 12.5 million square feet (msf). Chennai was the only market among top 8 cities to register a year-on-year (y-o-y) growth of over 110% in H1 2017. All other cities registered an y-o-y decline in net absorption in H1 2017 due to a slow start in Q1 2017. Of the total net absorption in H1 2017, over nearly 57% percent was recorded in the second quarter of 2017 (April-June 2017), a report by Cushman & Wakefield said on Wednesday.
Tapering supply has largely been responsible for the slowdown of net absorption in 2017, though there are some active enquiries by occupiers for consolidation/relocation of their office spaces. hinting towards a healthy leasing activity by the end of the year.
Talking about their report, Anshul Jain, Managing Director, India, Cushman & Wakefield, said, “Leasing activity has gathered pace in the second quarter owing to large transactions by IT-BPM and BFSI occupiers. Despite headwinds and cautious stance by IT-BPM occupiers, the IT-BPM sector continues to be the primary demand driver. Limited available quality supply has encouraged occupiers to pre-commit office spaces, resulting in a significant increase of about three times in such activity; primarily driven by IT-BPM and healthcare sectors in Hyderabad, Gurgaon and Bengaluru.”
Supply for the first half of the year recorded a decline of close to 50% as compared to last year with almost all markets experiencing a slowdown. Total supply was recorded at approximately 10 msf in H1 2017. Chennai being again the only exception to this saw an increased supply of 32% Y-o-Y. This lack of supply has been a critical reason for the slowdown in uptake of space in the first half of 2017.
Jain said, “As the dust settles on the geo-political and economic upheavals across the world along with some ground changes such as increased supply of office space, we are expected to see a healthy net absorption of close to 32-35 msf by the end of the year. Further, with a pre-commitment of close to 6 msf, we can expect the momentum of absorption to continue.”